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Finance Act 2002

Type Public General Act

Publication 2002-07-24

Last updated 2026-03-18

State In force

Department Statute Law Database

Source legislation.gov.uk

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Pool betting duty (6) A duty of excise to be known as pool betting duty shall be charged in accordance with sections 7 to 8C. (7) (1) If the amount of a person’s net pool betting receipts for an accounting period is greater than zero, pool betting duty is charged on those receipts. (2) The amount of that duty is 15 per cent of the amount of the receipts. (7A) For the purposes of section 7, the amount of a person’s net pool betting receipts for an accounting period is— $$S+E-W$where—S is the aggregate of amounts falling due to the person in the accounting period in respect of dutiable pool bets,E is the aggregate of expenses and profits falling within section 7E(2) that are attributable to the accounting period, andW is the aggregate of amounts paid by the person in the accounting period by way of winnings on dutiable pool bets (irrespective of when the bets were made or determined).$ (7B) (1) For the purposes of a calculation under section 7A of the amount of a person’s net pool betting receipts for any accounting period, a bet (wherever made) is a “dutiable pool bet” if— (a) the bet is made by way of pool betting, and (b) the following conditions are satisfied. (2) The first condition is that— (a) the bet is made by means of a totalisator situated in the United Kingdom and that person is the operator, or (b) the bet is made otherwise than by means of a totalisator and that person is the promoter and is in the United Kingdom. (3) The second condition is that the bet is not— (a) made by way of sponsored pool betting, (b) made as mentioned in section 4(3), or (c) made for community benefit. (4) The third condition is that if the bet was made before 31st March 2002, at least one event to which it relates takes place on or after that date. (7C) (1) This section applies for the purpose of calculating S in a calculation under section 7A. (2) Any payment that entitles a person to make a bet shall, if he makes the bet, be treated as stake money on the bet. (3) All payments made— (a) for or on account of or in connection with bets that are dutiable pool bets for the purposes of the calculation, (b) in addition to the stake money, and (c) by the persons making the bets, shall be treated as amounts due in respect of the bets except in so far as the contrary is proved by the person whose net pool betting receipts are being calculated. (7D) (1) Subsections (2) to (5) apply for the purpose of calculating S in a calculation under section 7A but have effect subject to any regulations under subsection (6). (2) Where— (a) a person makes a bet, and (b) the bet relates to a single event, or to two or more events all taking place on the same day, any sum due to a person in respect of the bet shall be treated as falling due on the day on which the event or events take place. (3) Where— (a) a person makes a bet, and (b) subsection (2) does not apply, any sum due to a person in respect of the bet shall (subject to subsection (5)) be treated as falling due when the bet is made. (4) Subsections (2) and (3) have effect in relation to a sum irrespective of when it is actually paid or required to be paid (even where a sum that those subsections require to be treated as falling due on or after 31st March 2002 was actually paid, or required to be paid, before that date). (5) As respects a bet made before 31st March 2002 that relates to events at least one of which takes place before that date and at least one of which takes place on or after that date, any sum paid on or after that date in respect of the bet shall be treated as falling due when it is paid. (6) The Commissioners may by regulations make provision as to when any sum due to a person in respect of a bet is to be treated as falling due for the purpose of calculating S in a calculation under section 7A. (7) Provision made by regulations under subsection (6) may not provide for a sum due to a person in respect of a bet to be treated as falling due— (a) earlier than when the bet is made, or (b) later than when the bet is determined. (8) Regulations made under subsection (6) may— (a) make provision that applies generally or only in relation to a specified description of bet; (b) make different provision for different purposes; (c) make provision relating to bets made before the regulations are made (including bets made before the passing of the Finance Act 2002); (d) make transitional provision. (7E) (1) Subsections (2) and (3) apply for the purpose of calculating E in a calculation under section 7A. (2) The expenses and profits falling within this subsection are (subject to subsection (3))— (a) those of the person whose net pool betting receipts are being calculated, and (b) those of any other person concerned with or benefiting from the promotion of the betting concerned. (3) Expenses and profits do not fall within subsection (2) so far as they are— (a) provided out of amounts due, in respect of bets that are dutiable pool bets for the purposes of the calculation, to the person whose net pool betting receipts are being calculated, or (b) referable to matters other than— (i) the promotion or management of the betting concerned, or (ii) activities ancillary to, or connected with, such promotion or management. (4) The Commissioners may by regulations make provision as to the accounting period to which expenses and profits falling within subsection (2) are to be treated as attributable for the purpose of calculating E in a calculation under section 7A. (5) Regulations made under subsection (4) may— (a) make provision that applies generally or only in relation to a specified description of bet; (b) make different provision for different purposes; (c) make provision applying in respect of expenses incurred, and profits accruing, before the regulations are made (including any incurred or accruing before the passing of the Finance Act 2002); (d) make transitional provision. (7F) (1) Subsections (2) to (5) apply for the purpose of calculating W in a calculation under section 7A. (2) The reference to paying an amount to a person includes a reference to holding it in an account if the person is notified that the amount is being held for him in the account and that he is entitled to withdraw it on demand. (3) The return of a stake shall be treated as a payment by way of winnings. (4) Only payments of money shall be taken into account. (5) Where a bet made before 31st March 2002 relates to events at least one of which takes place before that date and at least one of which takes place on or after that date, no account shall be taken of any payment by way of winnings on the bet. (6) The Commissioners may by regulations make provision as to when amounts paid by way of winnings are to be treated as being paid for the purposes of calculating W in a calculation under section 7A. (7) Regulations made under subsection (6) may— (a) make provision that applies generally or only in relation to a specified description of bet; (b) make different provision for different purposes; (c) make provision applying in respect of amounts paid before the regulations are made (including amounts paid before the passing of the Finance Act 2002); (d) make transitional provision. (8) (1) Pool betting duty charged on a person’s net pool betting receipts for an accounting period— (a) becomes due at the end of the period, (b) shall be paid by the person, and (c) shall, subject to any regulations under subsection (3) and any directions under paragraph 3 of Schedule 1 to this Act, be paid when it becomes due. (2) Pool betting duty that is due to be paid may be recovered from the following persons as if they were jointly and severally liable to pay the duty— (a) the person on whose net pool betting receipts the duty is charged (“the primary payer”); (b) a person responsible for the management of any business in the course of which any bets have been made that are dutiable pool bets for the purposes of calculations under section 7A of the amount of the primary payer’s net pool betting receipts for any accounting period; (c) a person responsible for the management of any totalisator used for the purposes of any such business; (d) where a person within any of paragraphs (a) to (c) is a company, a director. (3) The Commissioners may by regulations— (a) make provision as to when pool betting duty is to be paid (including provision repealing paragraph 3 of Schedule 1 to this Act and the reference to that paragraph in subsection (1)(c)); (b) make provision as to how pool betting duty is to be paid. (4) Regulations made under subsection (3) may— (a) make provision that applies generally or only in relation to a specified person or class of person; (b) make different provision for different purposes; (c) make transitional provision. (8A) (1) For the purposes of sections 6 to 8 (but subject to any direction under subsection (3)), a bet is made “for community benefit” if— (a) the promoter of the betting concerned is a community society or is bound to pay all benefits accruing from the betting to such a society, and (b) the person making the bet knows, when making it, that the purpose of the betting is to benefit such a society. (2) In the case of a bet made by means of a totalisator, the reference in subsection (1) to the promoter of the betting concerned is a reference to the operator. (3) The Commissioners may direct that any bet specified by the direction, or of a description so specified, is not a bet made for community benefit. (4) The power conferred by subsection (3) may not be exercised unless the Commissioners consider that an unreasonably large part of the amounts paid in respect of the bets concerned will, or may, be applied otherwise than— (a) in the payment of winnings, or (b) for the benefit of a community society. (5) In this section “community society” means— (a) a society established and conducted for charitable purposes only, or (b) a society established and conducted wholly or mainly for the support of athletic sports or athletic games and not established or conducted for purposes of private gain. (6) In this section “society” includes any club, institution, organisation or association of persons, by whatever name called. (8B) (1) For the purposes of sections 6 to 8— (a) each period that ends with the last Saturday in a calendar month, and begins with the Sunday immediately following the previous such Saturday, is an accounting period, but (b) the Commissioners may by regulations make provision for some other specified period to be an accounting period. (2) Regulations made under subsection (1)(b) may— (a) make provision that applies generally or only in relation to a specified person or class of person; (b) make different provision for different purposes; (c) make transitional provision. (8C) (1) For the purposes of sections 6 to 8A, “bet” does not include the taking of a ticket or chance in a lottery. (2) Where payments are made for the chance of winning any money or money’s worth on terms under which the persons making the payments have a power of selection that may (directly or indirectly) determine the winner, those payments shall be treated as bets for the purposes of sections 6 to 8A notwithstanding that the power is not exercised. (3) Subsection (2) has effect subject to section 12(3). (4) Where any payment entitles a person to take part in a transaction that is, on his part only, not a bet made by way of pool betting by reason of his not in fact making any stake as if the transaction were such a bet, the transaction shall be treated as such a bet for the purposes of pool betting duty (and section 7C(3) shall apply to any such payment).

3

In section 2(2) (bets to which section 2(1) does not apply)—

(a) in paragraph (b), after “bet," insert “ or ”, and

(b) omit paragraph (d) and the word “or" preceding it.

4

In section 4(6) (bets to which subsections (1) to (3) do not apply), for the words from “do not apply" to the end substitute “ do not apply to on-course bets. ”.

5

In section 9(2) (bets to which section applies), omit “or coupon betting" (in both places).

6

In section 9(3) (bets to which section does not apply)—

(a) in paragraph (a), omit “or coupon betting",

(b) for sub-paragraphs (i) to (iv) of paragraph (a) substitute—

(i) the bet is not made by means of a totalisator, and (ii) the promoter is in the Isle of Man; or

and

7

For section 9(6) substitute—

(6) Section 8C(1) to (3) above shall have effect for the purposes of subsections (2)(a) and (5) above as it has effect for the purposes of sections 6 to 8A above.

8

Omit section 11 (definition of coupon betting).

9

In section 12(3) (interpretation of sections 1 to 10 etc), omit “(except in sections 6, 7, 8, 9(2)(a) and 9(5) in their application to coupon betting)".

10

(1) Schedule 1 (administration etc of betting duties) is amended as follows.

(2) In paragraph 1, in the definition of “pool betting business", at the end insert “ or would or might involve such sums becoming so payable if receipts from bets made for community benefit (as defined by section 8A of this Act) were not excluded from that duty. ”.

(3) After paragraph 2 insert—

(2A) (1) Pool betting duty shall be under the care and management of the Commissioners. (2) Without prejudice to any other provision of this Schedule, the Commissioners may make regulations providing for any matter for which provision appears to them to be necessary for the administration or enforcement of pool betting duty or for the protection of the revenue from pool betting duty. (3) Regulations under sub-paragraph (2) above may in particular— (a) provide for payments on account of pool betting duty which may become chargeable to be made in advance; (b) provide for the giving of security by means of a deposit or otherwise for duty due or to become due.

(4) In paragraph 3, omit “shall be under the care and management of the Commissioners, and".

(5) In paragraph 4(2), for “sub-paragraphs (3) and (4)" substitute “ sub-paragraph (3) ”.

(6) Omit paragraph 4(4) to (6).

(7) In paragraph 5(1), for “made entry or given notice in accordance with paragraph 4(2) or (4)" substitute “ made entry in accordance with paragraph 4(2) ”.

(8) Renumber paragraph (b) of paragraph 5(2) as paragraph 5(3).

(9) In what remains of paragraph 5(2) after that renumbering, for the words from “paragraph 12(3) below, except that" to the end substitute “ sub-paragraph (3) below. ”.

(10) In paragraph 6(2), omit paragraph (b).

(11) Omit paragraphs 8 and 12.

(12) In paragraph 13(1)(b), after “any of paragraphs 2," insert “ 2A, ”.

(13) In paragraph 14(1), omit the words after paragraph (b).

(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 2 — Minor amendments and transitional provisions

Amendment in the Excise Duties (Surcharges or Rebates) Act 1979

11

In section 1(3) of the Excise Duties (Surcharges or Rebates) Act 1979 (c. 8) (liability to duty other than pool betting duty adjusted if order under section in force when duty becomes due), omit the words from “, except that if the duty is pool betting duty" to the end.

Amendments in Schedule 5 to the Finance Act 1994

12

(1) Paragraph 6 of Schedule 5 to the Finance Act 1994 (c. 9) (decisions under the Betting and Gaming Duties Act 1981 that are subject to review and appeal) is amended as follows.

(2) In sub-paragraph (2)(a) (decisions in connection with requiring security for duty)—

(a) after “regulations under paragraph 2" insert “ or 2A ”, and

(b) after “in relation to general betting duty" insert “ or pool betting duty ”.

(3) After sub-paragraph (2) insert—

(3) Any decision consisting in the giving of a direction under section 8A(3) of the Betting and Gaming Duties Act 1981 (pool betting duty: direction that bet is not made for community benefit).

Duty charged before 31st March 2002

13

(1) If—

(a) stake money is paid before 31st March 2002 in respect of a bet to which this paragraph applies, and

(b) pool betting duty charged on that money before that date is not paid before 24th April 2002,

that duty ceases on 24th April 2002 to be charged on that money.

(2) If—

(a) stake money is paid before 31st March 2002 in respect of such a bet, and

(b) pool betting duty charged on that money before that date is paid before 24th April 2002,

the person who paid that duty becomes entitled on 24th April 2002 to a credit equal to the amount of the duty.

(3) Effect is given to such a credit by setting it (until fully utilised) against pool betting duty that the person is liable to pay in respect of accounting periods for the purposes of pool betting duty that begin on or after 31st March 2002 (taking earlier such periods before later ones).

(4) Such a credit does not—

(a) carry interest,

(b) affect the payability of the duty mentioned in sub-paragraph (2), or

(5) This paragraph applies to a bet if—

(a) it is a dutiable pool bet for the purposes of a calculation, under the section 7A of the Betting and Gaming Duties Act 1981 inserted by this Schedule, of the amount of a person’s net pool betting receipts for any accounting period, and

(b) it is made before 31st March 2002 but all the events to which it relates take place on or after that date.

Notifications under paragraph 4(4) of Schedule 1 to that Act of premises used in connection with coupon betting

14

Any notification under paragraph 4(4) of Schedule 1 to the Betting and Gaming Duties Act 1981 (c. 63) (duty to notify premises used for purposes of pool betting business in connection only with coupon betting) that is effective immediately before 24th April 2002 shall on and after that date have effect (until withdrawn) as a notification made on 31st March 2002 under paragraph 4(3) of that Schedule (duty to notify premises used for purposes of betting business in connection only with general betting).

SCHEDULE 5

1

The Vehicle Excise and Registration Act 1994 (c. 22) is amended as follows.

2

For section 1(1) substitute—

(1) A duty of excise (“vehicle excise duty”) shall be charged in respect of every mechanically propelled vehicle that— (a) is registered under this Act (see section 21), or (b) is not so registered but is used, or kept, on a public road in the United Kingdom. (1A) Vehicle excise duty shall also be charged in respect of every thing (whether or not it is a vehicle) that has been, but has ceased to be, a mechanically propelled vehicle and— (a) is registered under this Act, or (b) is not so registered but is used, or kept, on a public road in the United Kingdom. (1B) In the following provisions of this Act “vehicle” means— (a) a mechanically propelled vehicle, or (b) any thing (whether or not it is a vehicle) that has been, but has ceased to be, a mechanically propelled vehicle. (1C) Vehicle excise duty charged in respect of a vehicle by subsection (1)(a) or (1A)(a) shall be paid on a licence to be taken out— (a) by the person in whose name the vehicle is registered under this Act, or (b) if that person is not the person keeping the vehicle, by either of those persons. (1D) Vehicle excise duty charged in respect of a vehicle by subsection (1)(b) or (1A)(b) shall be paid on a licence to be taken out by the person keeping the vehicle.

3

For section 2(2) to (4) (rates where duty charged in respect of keeping but not use) substitute—

(2) Subsection (1) applies subject to the following provisions of this section. (3) Where vehicle excise duty is charged by section 1(1)(b) or (1A)(b) in respect of the keeping of a vehicle on a road (and not in respect of its use), duty in respect of such keeping is chargeable by reference to the general rate currently specified in paragraph 1(2) of Schedule 1. (4) Subsections (5) and (6) apply where— (a) vehicle excise duty is charged by section 1(1)(a) or (1A)(a) in respect of a vehicle, and (b) were the vehicle not registered under this Act, duty would not be charged by section 1(1)(b) or (1A)(b) in respect of the use of the vehicle on a road. (5) Where one or more use licences have previously been issued for the vehicle, the duty charged by section 1(1)(a) or (1A)(a) is chargeable by reference to the annual rate currently applicable to a vehicle of the same description as that of the vehicle on the occasion of the issue of that licence (or the last of those licences). (6) In any other case, the duty charged by section 1(1)(a) or (1A)(a) is chargeable by reference to the general rate currently specified in paragraph 1(2) of Schedule 1. (7) In subsection (5) “use licence” means— (a) a vehicle licence issued for the use of a vehicle, or (b) a vehicle licence that is issued by reason of a vehicle being registered under this Act but which would have been issued for the use of the vehicle if the vehicle had not been registered under this Act.

4

For section 7(4) (vehicle licence valid only for vehicle for which it is issued) substitute—

(4) A vehicle licence is issued for the vehicle specified in the application for the licence (and for no other).

5

After section 7 insert—

(7A) (1) Regulations may make provision for a supplement of a prescribed amount to be payable in prescribed cases where— (a) a vehicle licence taken out for a vehicle expires, and (b) no vehicle licence is issued for the vehicle— (i) before the end of such period beginning with the expiry of the expired licence as may be prescribed, and (ii) for a period beginning with that expiry. (2) A supplement under this section— (a) shall be payable by such person, or jointly and severally by such persons, as may be prescribed; (b) shall become payable at such time as may be prescribed; (c) may be of an amount that varies according to the length of the period between— (i) the expiry of the licence by reason of whose non-renewal the supplement becomes payable, and (ii) the time at which the supplement is paid or that licence is renewed. (3) A supplement under this section that has become payable— (a) is in addition to any vehicle excise duty charged in respect of the vehicle concerned; (b) does not cease to be payable by reason of a vehicle licence being taken out for the vehicle after the supplement has become payable; (c) may, without prejudice to section 6 or 7B(2) and (3) or any other provision of this Act, be recovered as a debt due to the Crown. (4) In this section— (a) references to the expiry of a vehicle licence include a reference to— (i) its surrender, and (ii) its being treated as no longer in force for the purposes of subsection (2) of section 31A by subsection (4) of that section; (b) “prescribed” means prescribed by, or determined in accordance with, regulations; (c) “regulations” means regulations made by the Secretary of State with the consent of the Treasury. (5) No regulations to which subsection (6) applies shall be made under this section unless a draft of the regulations has been laid before, and approved by a resolution of, each House of Parliament. (6) This subsection applies to regulations under this section that— (a) provide for a supplement to be payable in a case where one would not otherwise be payable, (b) increase the amount of a supplement, (c) provide for a supplement to become payable earlier than it would otherwise be payable, or (d) provide for a supplement to be payable by a person by whom the supplement would not otherwise be payable. (7B) (1) The Secretary of State may by regulations make provision for notifying the person in whose name a vehicle is registered under this Act about— (a) any supplement under section 7A that may or has become payable on non-renewal of a vehicle licence for the vehicle; (b) when failure to renew a vehicle licence may result in the person being guilty of an offence under section 31A. (2) The Secretary of State may by regulations make provision— (a) for assessing an amount of supplement due under section 7A from any person and for notifying that amount to that person or any person acting in a representative capacity in relation to that person; (b) for an amount assessed and notified under such regulations to be deemed to be an amount of vehicle excise duty due from the person assessed and recoverable accordingly; (c) for review of decisions under such regulations and for appeals with respect to such decisions or decisions on such reviews. (3) Regulations under subsection (2) may, in particular, make provision that, subject to any modifications that the Secretary of State considers appropriate, corresponds or is similar to— (a) any provision made by sections 12A and 12B of the Finance Act 1994 (assessments related to excise duty matters), or (b) any provision made by sections 14 to 16 of that Act (customs and excise reviews and appeals). (4) Sums received by way of supplements under section 7A shall be paid into the Consolidated Fund.

6

(1) In section 22 (registration regulations), in subsection (1D) (power to require details about unlicensed vehicles), after paragraph (a) insert—

(aa) who does not renew a vehicle licence for a vehicle registered under this Act in his name,

(2) After that subsection insert—

(1DA) For the purposes of subsection (1D)(aa) a person shall be regarded as not renewing a vehicle licence for a vehicle registered in his name if— (a) a vehicle for which a vehicle licence is in force is registered in his name, and (b) he does not, at such time as may be prescribed by the regulations or within such period as may be so prescribed, take out a vehicle licence to have effect from the expiry of the vehicle licence mentioned in paragraph (a).

7

In section 29(7) (rate of duty by reference to which penalty is calculated), for “section 2(2) to (4)" substitute “ section 2(3) to (6) ”.

8

After section 31 insert—

Offence of being registered keeper of unlicensed vehicle (31A) (1) If a vehicle registered under this Act is unlicensed, the person in whose name the vehicle is registered is guilty of an offence. (2) For the purposes of this section a vehicle is unlicensed if no vehicle licence or trade licence is in force for or in respect of the vehicle. (3) Subsection (1) does not apply to a vehicle if— (a) it is an exempt vehicle in respect of which regulations under this Act require a nil licence to be in force and a nil licence is in force in respect of the vehicle, or (b) it is an exempt vehicle that is not one in respect of which regulations under this Act require a nil licence to be in force. (4) Where a vehicle for which a vehicle licence is in force is transferred by the holder of the licence to another person, the licence is to be treated for the purposes of subsection (2) as no longer in force unless it is delivered to the other person with the vehicle. (5) Where— (a) an application is made for a vehicle licence for any period, and (b) a temporary licence is issued pursuant to the application, subsection (4) does not apply to the licence applied for if, on a transfer of the vehicle during the currency of the temporary licence, the temporary licence is delivered with the vehicle to the transferee. (31B) (1) A person (“the registered keeper”) in whose name an unlicensed vehicle is registered at any particular time (“the relevant time”) does not commit an offence under section 31A at that time if any of the following conditions are satisfied. (2) The first condition is that the registered keeper— (a) is not at the relevant time the person keeping the vehicle, and (b) if previously he was the person keeping the vehicle, he has by the relevant time complied with any requirements under section 22(1)(d)— (i) that are prescribed for the purposes of this condition, and (ii) that he is required to have complied with by the relevant or any earlier time. (3) The second condition is that— (a) the registered keeper is at the relevant time the person keeping the vehicle, (b) at the relevant time the vehicle is neither kept nor used on a public road, and (c) the registered keeper has by the relevant time complied with any requirements under section 22(1D)— (i) that are prescribed for the purposes of this condition, and (ii) that he is required to have complied with by the relevant or any earlier time. (4) The third condition is that— (a) the vehicle has been stolen before the relevant time, (b) the vehicle has not been recovered by the relevant time, and (c) any requirements under subsection (6) that, in connection with the theft, are required to have been complied with by the relevant or any earlier time have been complied with by the relevant time. (5) The fourth condition is that the relevant time falls within a period (“the grace days”)— (a) beginning with the expiry of the last vehicle licence to be in force for the vehicle, and (b) of a prescribed length, and a vehicle licence for the vehicle is taken out within the grace days for a period beginning with the grace days. (6) The Secretary of State may by regulations make provision for the purposes of subsection (4)(c) as to the persons to whom, the times at which and the manner in which the theft of a vehicle is to be notified. (7) The Secretary of State may by regulations make provision amending this section for the purpose of providing for further exceptions to section 31A(1) (or varying or revoking any such further exceptions). (8) A person accused of an offence under section 31A(1) is not entitled to the benefit of an exception conferred by or under this section unless evidence is adduced that is sufficient to raise an issue with respect to that exception, but where evidence is so adduced it is for the prosecution to prove beyond reasonable doubt that the exception does not apply. (9) In this section— (a) references to the expiry of a vehicle licence include a reference to— (i) its surrender, and (ii) its being treated as no longer in force for the purposes of subsection (2) of section 31A by subsection (4) of that section; (b) “prescribed” means prescribed by regulations made by the Secretary of State. (31C) (1) A person guilty of an offence under section 31A(1) is liable on summary conviction to— (a) an excise penalty of— (i) level 3 on the standard scale, or (ii) five times the amount of vehicle excise duty chargeable in respect of the vehicle concerned, whichever is the greater; and (b) if subsection (3) applies to him, an excise penalty (in addition to any under paragraph (a)) of an amount that complies with subsection (2). (2) An amount complies with this subsection if it— (a) is not less than the greater of— (i) the maximum of the penalty to which the person is liable under subsection (1)(a), and (ii) the amount of the supplement (if any) that became payable by him by reason of non-renewal of the vehicle licence for the vehicle that last expired before the commission of the offence; and (b) is not more than the greatest of— (i) the maximum of the penalty to which the person is liable under subsection (1)(a), (ii) the amount mentioned in paragraph (a)(ii), and (iii) ten times the amount of vehicle excise duty chargeable in respect of the vehicle. (3) This subsection applies to the person if— (a) he was, at the time proceedings for the offence were commenced, the person in whose name the vehicle concerned was registered under this Act, and (b) that vehicle was unlicensed throughout the period beginning with the commission of the offence and ending with the commencement of those proceedings. (4) The amount of vehicle excise duty chargeable in respect of a vehicle is to be taken for the purposes of subsections (1) and (2) to be an amount equal to the annual rate of duty applicable to the vehicle at the date on which the offence was committed. (5) Where in the case of a vehicle kept (but not used) on a public road that annual rate differs from the annual rate by reference to which the vehicle was at that date chargeable under section 2(3) to (6), the amount of the vehicle excise duty chargeable in respect of the vehicle is to be taken for those purposes to be an amount equal to the latter rate. (6) In the case of a conviction for a continuing offence, the offence is to be taken for the purposes of subsections (4) and (5) to have been committed on the date or latest date to which the conviction relates. (7) In this section, references to the expiry of a vehicle licence include a reference to— (a) its surrender, and (b) its being treated as no longer in force for the purposes of subsection (2) of section 31A by subsection (4) of that section. Offences under sections 29 and 31A: supplementary

9

(1) In section 32 (sections 29 to 31: supplementary), in subsection (1) (discharges to be treated as convictions)—

(a) in the words before paragraph (a), after “section 29" insert “ or 31A ”, and

(b) in the words after paragraph (c), after “sections 29 to 31" insert “ or (as the case may be) sections 31A to 31C ”.

(2) In the heading of that section, for “31" substitute “ 31C ”.

10

In section 33(3)(b) (offences of not exhibiting licence are without prejudice to offences of not having a licence), after “sections 29" insert “ , 31A ”.

11

In section 34(4) (rate of duty by reference to which penalty is calculated), for “section 2(2) to (4)" substitute “ section 2(3) to (6) ”.

12

In section 47 (proceedings in England and Wales or Northern Ireland), in each of subsections (1) and (2)(a) (who may prosecute and time limit), after “section 29," insert “ 31A, ”.

13

In section 48(3)(a) (proceedings in Scotland: time limit), after “section 29," insert “ 31A, ”.

14

In section 53 (burden of proof of certain matters in proceedings for certain offences), after “section 29," insert “ 31A, ”.

15

In section 54 (single witness sufficient in Scottish proceedings), after “section 29" insert “ , 31A ”.

16

In section 57 (regulations), after subsection (7) insert—

(7A) Subsection (7) does not apply to a statutory instrument containing regulations under section 7A to which subsection (6) of that section applies.

17

In section 62(1) (definitions), for the definition of “vehicle" substitute—

“vehicle” shall be construed in accordance with section 1(1B);

SCHEDULE 6

1

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

Credit-tokens and non-cash vouchers

2

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

3

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

Taxation of benefit where income received free of tax

4

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

Benefits in connection with termination of employment or change in duties or emoluments

5

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

Priority between charges under sections 148 and 595 of the Taxes Act 1988

6

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

SCHEDULE 7

The following Schedule is inserted after Schedule 7AA to the Taxation of Chargeable Gains Act 1992 (c. 12)—

SCHEDULE 8

Part 1 — New Schedule 7AC to the Taxation of Chargeable Gains Act 1992

1

The following Schedule is inserted after Schedule 7AB to the Taxation of Chargeable Gains Act 1992 (c. 12)—

SCHEDULE 7AC (1) (1) A gain accruing to a company (“the investing company”) on a disposal of shares or an interest in shares in another company (“the company invested in”) is not a chargeable gain if the requirements of this Schedule are met. (2) The requirements are set out in— - Part 2 (the substantial shareholding requirement), and - Part 3 (requirements to be met in relation to the investing company and the company invested in). (3) The exemption conferred by this paragraph does not apply in the circumstances specified in paragraph 5 or the cases specified in paragraph 6. (2) (1) A gain accruing to a company (“company A”) on a disposal of an asset related to shares in another company (“company B”) is not a chargeable gain if either of the following conditions is met. (2) The first condition is that— (a) immediately before the disposal company A holds shares or an interest in shares in company B, and (b) any gain accruing to company A on a disposal at that time of the shares or interest would, by virtue of paragraph 1, not be a chargeable gain. (3) The second condition is that— (a) immediately before the disposal company A does not hold shares or an interest in shares in company B but is a member of a group and another member of that group does hold shares or an interest in shares in company B, and (b) if company A, rather than that other company, held the shares or interest, any gain accruing to company A on a disposal at that time of the shares or interest would, by virtue of paragraph 1, not be a chargeable gain. (4) Where assets of a company are vested in a liquidator under section 145 of the Insolvency Act 1986 or Article 123 of the Insolvency (Northern Ireland) Order 1989 or otherwise, this paragraph applies as if the assets were vested in, and the acts of the liquidator in relation to the assets were the acts of, the company (acquisitions from or disposals to him by the company being disregarded accordingly). (5) The exemption conferred by this paragraph does not apply in the circumstances specified in paragraph 5 or the cases specified in paragraph 6. (3) (1) A gain accruing to a company (“company A”) on a disposal of shares, or an interest in shares or an asset related to shares, in another company (“company B”) is not a chargeable gain if the following conditions are met. (2) The conditions are— (a) that at the time of the disposal company A meets the requirement in paragraph 7 (the substantial shareholding requirement) in relation to company B; (b) that a chargeable gain or allowable loss would, apart from this paragraph, accrue to company A on the disposal (but see sub-paragraph (3) below); (c) that at the time of the disposal— (i) company A is resident in the United Kingdom, or (ii) any chargeable gain accruing to company A on the disposal would, by virtue of section 10(3), form part of that company’s chargeable profits for corporation tax purposes; (d) that there was a time within the period of two years ending with the disposal (“the relevant period”) when, if— (i) company A, or (ii) a company that at any time in the relevant period was a member of the same group as company A, had disposed of shares or an interest in shares in company B that it then held, a gain accruing would, by virtue of paragraph 1, not have been a chargeable gain; and (e) that, if at the time of the disposal the requirements of paragraph 19 (requirements relating to company invested in) are not met in relation to company B, there was a time within the relevant period when company B was controlled by— (i) company A, or (ii) company A together with any persons connected with it, or (iii) a company that at any time in the relevant period was a member of the same group as company A, or (iv) any such company together with any persons connected with it. (3) Sub-paragraph (1) does not apply if— (a) the condition in sub-paragraph (2)(b) is met but would not be met but for a failure to meet the requirement in paragraph 18(1)(b) (requirement as to investing company to be met immediately after the disposal), and (b) the failure to meet that requirement is not due to— (i) the fact that company A has been wound up or dissolved, or (ii) where the winding up or dissolution takes place as soon as is reasonably practicable in the circumstances, the fact that company A is about to be wound up or dissolved. (4) In determining for the purpose of sub-paragraph (2)(d) whether a gain accruing on the hypothetical disposal referred to would have been a chargeable gain, the requirements of paragraph 18(1)(b) and of paragraph 19(1)(b) (requirement as to company invested in to be met immediately after the disposal) shall be assumed to be met. (5) Where— (a) immediately before the disposal company B holds an asset, (b) the expenditure allowable in computing any gain or loss on that asset, were it to be disposed of by company B immediately before that disposal, would fall to be reduced because of a claim to relief under section 165 (gifts relief) in relation to an earlier disposal, and (c) that earlier disposal took place within the relevant period, sub-paragraph (1) does not prevent a gain accruing to company A on the disposal from being a chargeable gain but any loss so accruing is not an allowable loss. (6) Where assets of company B are vested in a liquidator under section 145 of the Insolvency Act 1986 or Article 123 of the Insolvency (Northern Ireland) Order 1989 or otherwise, sub-paragraph (5)(a) applies as if the assets were vested in the company. (7) In determining “the relevant period” for the purposes of sub-paragraph (2)(d) or (e) or sub-paragraph (5)(c), section 28 (time of disposal under contract) applies with the omission of subsection (2) (postponement of time of disposal in case of conditional contract). (8) The exemption conferred by this paragraph does not apply in the circumstances specified in paragraph 5 or the cases specified in paragraph 6. (4) (1) For the purposes of determining whether an exemption conferred by this Schedule applies, the question whether there is a disposal shall be determined without regard to— (a) section 116(10) (reorganisation, conversion of securities, etc treated as not involving disposal), (b) section 127 (share reorganisations etc treated as not involving disposal), or (c) section 192(2)(a) (distribution not treated as capital distribution). (2) Sub-paragraph (1) does not apply to a disposal of shares if the effect of its applying would be that relief attributable to the shares under Schedule 15 to the Finance Act 2000 (corporate venturing scheme) would be withdrawn or reduced under paragraph 46 of that Schedule (withdrawal or reduction of investment relief on disposal of shares). (3) Where or to the extent that an exemption conferred by this Schedule does apply— (a) the provisions mentioned in sub-paragraph (1)(a) and (b) do not apply in relation to the disposal, and (b) the provision mentioned in sub-paragraph (1)(c) does not apply in relation to the subject matter of the disposal. (4) Where section 127 is disapplied by sub-paragraph (3)(a) in a case in which that section would otherwise have applied in relation to the disposal by virtue of paragraph 84 of Schedule 15 to the Finance Act 2000 (corporate venturing scheme: share exchanges), paragraph 85 of that Schedule (attribution of relief to new shares) does not apply. (5) In this paragraph any reference to section 127 includes a reference to that provision as applied by any enactment relating to corporation tax. (5) (1) Where in pursuance of arrangements to which this paragraph applies— (a) an untaxed gain accrues to a company (“company A”) on a disposal of shares, or an interest in shares or an asset related to shares, in another company (“company B”), and (b) before the accrual of that gain— (i) company A acquired control of company B, or the same person or persons acquired control of both companies, or (ii) there was a significant change of trading activities affecting company B at a time when it was controlled by company A, or when both companies were controlled by the same person or persons, none of the exemptions in this Schedule applies to the disposal. (2) This paragraph applies to arrangements from which the sole or main benefit that (but for this paragraph) could be expected to arise is that the gain on the disposal would, by virtue of this Schedule, not be a chargeable gain. (3) For the purposes of sub-paragraph (1)(a) a gain is “untaxed” if the gain, or all of it but a part that is not substantial, represents profits that have not been brought into account (in the United Kingdom or elsewhere) for the purposes of tax on profits for a period ending on or before the date of the disposal. (4) The reference in sub-paragraph (3) to profits being brought into account for the purposes of tax on profits includes a reference to the case where— (a) an amount in respect of those profits is apportioned to a company resident in the United Kingdom by virtue of subsection (3) of section 747 of the Taxes Act 1988 (imputation of chargeable profits etc of controlled foreign companies), and (b) a sum is chargeable on that company in respect of that amount by virtue of subsection (4) of that section for an accounting period of that company ending on or before the date of the disposal. (5) For the purposes of sub-paragraph (1)(b)(ii) there is a “significant change of trading activities affecting company B” if— (a) there is a major change in the nature or conduct of a trade carried on by company B or a 51% subsidiary of company B, or (b) there is a major change in the scale of the activities of a trade carried on by company B or a 51% subsidiary of company B, or (c) company B or a 51% subsidiary of company B begins to carry on a trade. (6) In this paragraph— - “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable; - “major change in the nature or conduct of a trade” has the same meaning as in section 768 of the Taxes Act (change of ownership of company: disallowance of trading losses); - “profits” means income or gains (including unrealised income or gains). (6) (1) The exemptions conferred by this Schedule do not apply— (a) to a disposal that by virtue of any enactment relating to chargeable gains is deemed to be for a consideration such that no gain or loss accrues to the person making the disposal, (b) to a disposal a gain on which would, by virtue of any enactment not contained in this Schedule, not be a chargeable gain, or (c) to a deemed disposal under section 440(1) or (2) of the Taxes Act (deemed disposal on transfer of asset of insurance company from one category to another). (2) The hypothetical disposal referred to in paragraph 2(2)(b) or (3)(b) or paragraph 3(2)(d) shall be assumed not to be a disposal within sub-paragraph (1)(a), (b) or (c) above. Part 2The substantial shareholding requirement (7) The investing company must have held a substantial shareholding in the company invested in throughout a twelve-month period beginning not more than two years before the day on which the disposal takes place. (8) (1) For the purposes of this Schedule a company holds a “substantial shareholding” in another company if it holds shares or interests in shares in that company by virtue of which— (a) it holds not less than 10% of the company’s ordinary share capital, (b) it is beneficially entitled to not less than 10% of the profits available for distribution to equity holders of the company, and (c) it would be beneficially entitled on a winding up to not less than 10% of the assets of the company available for distribution to equity holders. This is without prejudice to what is meant by “substantial” where the word appears in other contexts. (2) Schedule 18 to the Taxes Act 1988 (meaning of equity holder and determination of profits or assets available for distribution) applies for the purposes of sub-paragraph (1). (3) In that Schedule as it applies for those purposes— (a) for any reference to sections 403C and 413(7) of that Act, or either of those provisions, substitute a reference to sub-paragraph (1) above; (b) omit the words in paragraph 1(4) from “but" to the end; (c) omit paragraph 5(3) and paragraphs 5B to 5F; and (d) omit paragraph 7(1)(b). (9) (1) For the purposes of paragraph 7 (the substantial shareholding requirement) a company that is a member of a group is treated— (a) as holding any shares or interest in shares held by any other company in the group, and (b) as having the same entitlement as any such company to any rights enjoyed by virtue of holding shares or an interest in shares. (2) Sub-paragraph (1) is subject to paragraph 17(4) (exclusion of aggregation in case of assets of long-term insurance fund of insurance company). (10) (1) For the purposes of this Part the period for which a company has held shares is treated as extended by any earlier period during which the shares concerned, or shares from which they are derived, were held— (a) by a company from which the shares concerned were transferred to the first-mentioned company on a no-gain/ no-loss transfer, or (b) by a company from which the shares concerned, or shares from which they are derived, were transferred on a previous no-gain/no-loss transfer— (i) to a company within paragraph (a), or (ii) to another company within this paragraph. (2) For the purposes of sub-paragraph (1)— (a) a “no-gain/no-loss transfer” means a disposal and corresponding acquisition that by virtue of any enactment relating to chargeable gains are deemed to be for a consideration such that no gain or loss accrues to the person making the disposal; (b) a transfer shall be treated as if it had been a no-gain/no- loss transfer if it is a transfer to which subsection (1) of section 171 (transfers within a group) would apply but for subsection (3) of that section. (3) Where sub-paragraph (1) applies to extend the period for which a company (“company A”) is treated as having held any shares, that company shall be treated for the purposes of this Part as having had at any time the same entitlement— (a) to shares, and (b) to any rights enjoyed by virtue of holding shares, as the company (“company B”) that at that time held the shares concerned or, as the case may be, the shares from which they are derived. (4) The shares and rights to be so attributed to company A include any holding or entitlement attributed at that time to company B under paragraph 9 (aggregation of holdings of group companies). (5) In this paragraph, except in paragraphs (a) to (c) of sub-paragraph (6), “shares” includes an interest in shares. (6) For the purposes of this paragraph shares are “derived” from other shares only where— (a) a company becomes a co-owner of shares previously owned by it alone, or vice versa, (b) a company’s interest in shares as co-owner changes (without the company ceasing to be a co-owner), (c) one holding of shares is treated by virtue of section 127 as the same asset as another, or (d) there is a sequence of two or more of the occurrences mentioned in paragraphs (a) to (c). The reference in paragraph (c) to section 127 includes a reference to that provision as applied by any enactment relating to corporation tax. (11) (1) For the purposes of this Part a company is not regarded as having held shares throughout a period if, at any time during that period, there is a deemed disposal and reacquisition of— (a) the shares concerned, or (b) shares, or an interest in shares, from which those shares are derived. (2) For the purposes of this Part a company is not regarded as having held an interest in shares throughout a period if, at any time during that period, there is a deemed disposal and reacquisition of— (a) the interest concerned, or (b) shares, or an interest in shares, from which that interest is derived. (3) In this paragraph— - “deemed disposal and reacquisition” means a disposal and immediate reacquisition treated as taking place under any enactment relating to corporation tax; - “derived” has the same meaning as in paragraph 10. (12) (1) This paragraph applies where— (a) a company that holds shares in another company transfers the shares under a repurchase agreement, and (b) by virtue of section 263A(1) (agreements for sale and repurchase of securities) the disposal is disregarded for the purposes of the enactments relating to chargeable gains. (2) During the period of the repurchase agreement— (a) the original owner shall be treated for the purposes of this Part as continuing to hold the shares transferred and accordingly as retaining his entitlement to any rights attached to them, and (b) the interim holder shall be treated for those purposes as not holding the shares transferred and as not becoming entitled to any such rights. This is subject to the following qualification. (3) If at any time before the end of the period of the repurchase agreement the original owner, or another member of the same group as the original owner, becomes the holder— (a) of any of the shares transferred, or (b) of any shares directly or indirectly representing any of the shares transferred, sub-paragraph (2) does not apply after that time in relation to those shares or, as the case may be, in relation to the shares represented by those shares. (4) In this paragraph a “repurchase agreement” means an agreement under which— (a) a person (“the original owner”) transfers shares to another person (“the interim holder”) under an agreement to sell them, and (b) the original owner or a person connected with him is required to buy them back either— (i) in pursuance of an obligation to do so imposed by that agreement or by any related agreement, or (ii) in consequence of the exercise of an option acquired under that agreement or any related agreement. For the purposes of paragraph (b) agreements are related if they are entered into in pursuance of the same arrangements (regardless of the date on which either agreement is entered into). (5) Any reference in this paragraph to the period of a repurchase agreement is to the period beginning with the transfer of the shares by the original owner to the interim holder and ending with the repurchase of the shares in pursuance of the agreement. (13) (1) This paragraph applies where— (a) a company that holds shares in another company transfers the shares under a stock lending arrangement, and (b) by virtue of section 263B(2) (stock lending arrangements) the disposal is disregarded for the purposes of the enactments relating to chargeable gains. (2) During the period of the stock lending arrangement— (a) the lender shall be treated for the purposes of this Part as continuing to hold the shares transferred and accordingly as retaining his entitlement to any rights attached to them, and (b) the borrower shall be treated for those purposes as not holding the shares transferred and as not becoming entitled to any such rights. This is subject to the following qualification. (3) If at any time before the end of the period of the stock lending arrangement the lender, or another member of the same group as the lender, becomes the holder— (a) of any of the shares transferred, or (b) of any shares directly or indirectly representing any of the shares transferred, sub-paragraph (2) does not apply after that time in relation to those shares or, as the case may be, in relation to the shares represented by those shares. (4) In this paragraph a “stock lending arrangement” means arrangements between two persons (“the borrower” and “the lender”) under which— (a) the lender transfers shares to the borrower otherwise than by way of sale, and (b) a requirement is imposed on the borrower to transfer those shares back to the lender otherwise than by way of sale. (5) Any reference in this paragraph to the period of a stock lending arrangement is to the period beginning with the transfer of the shares by the lender to the borrower and ending— (a) with the transfer of the shares back to the lender in pursuance of the arrangement, or (b) when it becomes apparent that the requirement for the borrower to make a transfer back to the lender will not be complied with. (6) The following provisions apply for the purposes of this paragraph as they apply for the purposes of section 263B— (a) subsections (5) and (6) of that section (references to transfer back of securities to include transfer of other securities of the same description); (b) section 263C (references to transfer back of securities to include payment in respect of redemption). (14) (1) This paragraph applies where shares in one company (“company X”)— (a) are exchanged (or deemed to be exchanged) for shares in another company (“company Y”), or (b) are deemed to be exchanged by virtue of section 136 for shares in company X and shares in another company (“company Y”), in circumstances such that, under section 127 as that section applies by virtue of section 135 or 136, the original shares and the new holding are treated as the same asset. (2) Where company Y— (a) is the company invested in, and is accordingly the company by reference to which the requirement of paragraph 7 (the substantial shareholding requirement) falls to be met, or (b) is a company by reference to which, by virtue of this paragraph, that requirement may be met, or (c) is a company by reference to which, by virtue of paragraph 15 (effect of earlier demerger) that requirement may be met, that requirement may instead be met, in relation to times before the exchange (or deemed exchange), by reference to company X. (3) If in any case that requirement can be met by virtue of this paragraph (or by virtue of this paragraph together with paragraph 15), it shall be treated as met. (4) In sub-paragraph (1) “original shares” and “new holding” shall be construed in accordance with sections 126, 127, 135 and 136. (15) (1) This paragraph applies where shares in one company (“the subsidiary”) are transferred by another company (“the parent company”) on a demerger. (2) Where the subsidiary— (a) is the company invested in, and is accordingly the company by reference to which the requirement of paragraph 7 (the substantial shareholding requirement) falls to be met, or (b) is a company by reference to which, by virtue of this paragraph, that requirement may be met, or (c) is a company by reference to which, by virtue of paragraph 14 (effect of earlier company reconstruction etc), that requirement may be met, that requirement may instead be met, in relation to times before the transfer, by reference to the parent company. (3) If in any case that requirement can be met by virtue of this paragraph (or by virtue of this paragraph together with paragraph 14), it shall be treated as met. (4) In this paragraph a “transfer of shares on a demerger” means a transfer such that, by virtue of section 192(2)(b), sections 126 to 130 apply as if the parent company and the subsidiary were the same company and the transfer were a reorganisation of that company’s share capital not involving a disposal or acquisition. (16) Where assets of the investing company, or of a company that is a member of the same group as the investing company, are vested in a liquidator under section 145 of the Insolvency Act 1986 or Article 123 of the Insolvency (Northern Ireland) Order 1989 or otherwise, this Part applies as if the assets were vested in, and the acts of the liquidator in relation to the assets were the acts of, the company (acquisitions from or disposals to him by the company being disregarded accordingly). (17) (1) In the following two cases paragraph 8(1) (meaning of substantial shareholding) has effect as if, in paragraphs (a), (b) and (c), “30%" were substituted for “10%". (2) The first case is where the investing company is an insurance company and the disposal is of an asset of its long-term insurance fund. (3) The second case is where— (a) the investing company is a 51% subsidiary of an insurance company, and (b) the insurance company holds as an asset of its long-term insurance fund shares or an interest in shares— (i) in the investing company, or (ii) in another company through which it owns shares in the investing company. The reference in paragraph (b)(ii) to owning shares through another company has the same meaning as in section 838 of the Taxes Act (subsidiaries). (4) Where the investing company is a member of a group that includes an insurance company, paragraph 9 (aggregation of holdings of group companies) does not apply in relation to shares or an interest in shares held by the insurance company as assets of its long-term insurance fund. (5) In this paragraph “insurance company” and “long-term insurance fund” have the meanings given by section 431(2) of the Taxes Act. Part 3Requirements to be met in relation to investing company and company invested in (18) (1) The investing company must— (a) have been a sole trading company or a member of a qualifying group throughout the period (“the qualifying period”)— (i) beginning with the start of the latest twelve-month period by reference to which the requirement of paragraph 7 (the substantial shareholding requirement) is met, and (ii) ending with the time of the disposal, and (b) be a sole trading company or a member of a qualifying group immediately after the time of the disposal. (2) For this purpose a “qualifying group” means— (a) a trading group, or (b) a group that would be a trading group if the activities of any group member that is not established for profit were disregarded to the extent that they are carried on otherwise than for profit. In determining whether a company is established for profit, no account shall be taken of any object or power of the company that is only incidental to its main objects. (3) The requirement in sub-paragraph (1)(a) is met if the investing company was a sole trading company for some of the qualifying period and a member of a qualifying group for the remainder of that period. (4) The requirement in sub-paragraph (1)(a) is treated as met if at the time of the disposal— (a) the investing company is a member of a group, and (b) there is another member of the group in relation to which that requirement would have been met if— (i) the subject matter of the disposal had been transferred to it immediately before the disposal in circumstances in which section 171(1) (transfers within a group) applied, and (ii) it had made the disposal. (5) If the disposal is by virtue of section 28(1) or (2) (asset disposed of under contract) treated as made at a time before the asset is conveyed or transferred, the requirements in sub-paragraph (1)(a) and (b) must also be complied with as they would have effect if the references in those provisions and sub-paragraph (4) to the time of the disposal were to the time of the conveyance or transfer. (6) In this paragraph a “sole trading company” means a trading company that is not a member of a group. (19) (1) The company invested in must— (a) have been a qualifying company throughout the period— (i) beginning with the start of the latest twelve-month period by reference to which the requirement of paragraph 7 (the substantial shareholding requirement) is met, and (ii) ending with the time of the disposal, and (b) be a qualifying company immediately after the time of the disposal. (2) For this purpose a “qualifying company” means a trading company or the holding company of a trading group or a trading subgroup. (3) If the disposal is by virtue of section 28(1) or (2) (asset disposed of under contract) treated as made at a time before the asset is conveyed or transferred, the requirements in sub-paragraph (1)(a) and (b) must also be complied with as they would have effect if the references there to the time of the disposal were to the time of the conveyance or transfer. (20) (1) In this Schedule “trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities. (2) For the purposes of sub-paragraph (1) “trading activities” means activities carried on by the company— (a) in the course of, or for the purposes of, a trade being carried on by it, (b) for the purposes of a trade that it is preparing to carry on, (c) with a view to its acquiring or starting to carry on a trade, or (d) with a view to its acquiring a significant interest in the share capital of another company that— (i) is a trading company or the holding company of a trading group or trading subgroup, and (ii) if the acquiring company is a member of a group, is not a member of that group. (3) Activities do not qualify as trading activities under sub-paragraph (2)(c) or (d) unless the acquisition is made, or (as the case may be) the company starts to carry on the trade, as soon as is reasonably practicable in the circumstances. (4) The reference in sub-paragraph (2)(d) to the acquisition of a significant interest in the share capital of another company is to an acquisition of ordinary share capital in the other company— (a) such as would make that company a 51% subsidiary of the acquiring company, or (b) such as would give the acquiring company a qualifying shareholding in a joint venture company without making the two companies members of the same group. (21) (1) In this Schedule “trading group” means a group— (a) one or more of whose members carry on trading activities, and (b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading activities. (2) For the purposes of sub-paragraph (1) “trading activities” means activities carried on by a member of the group— (a) in the course of, or for the purposes of, a trade being carried on by any member of the group, (b) for the purposes of a trade that any member of the group is preparing to carry on, (c) with a view to any member of the group acquiring or starting to carry on a trade, or (d) with a view to any member of the group acquiring a significant interest in the share capital of another company that— (i) is a trading company or the holding company of a trading group or trading subgroup, and (ii) is not a member of the same group as the acquiring company. (3) Activities do not qualify as trading activities under sub-paragraph (2)(c) or (d) unless the acquisition is made, or (as the case may be) the group member in question starts to carry on the trade, as soon as is reasonably practicable in the circumstances. (4) The reference in sub-paragraph (2)(d) to the acquisition of a significant interest in the share capital of another company is to an acquisition of ordinary share capital in the other company— (a) such as would make that company a member of the same group as the acquiring company, or (b) such as would give the acquiring company a qualifying shareholding in a joint venture company without making the joint venture company a member of the same group as the acquiring company. (5) For the purposes of this paragraph the activities of the members of the group shall be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities). (22) (1) In this Schedule “trading subgroup” means a subgroup— (a) one or more of whose members carry on trading activities, and (b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading activities. (2) For the purposes of sub-paragraph (1) “trading activities” means activities carried on by a member of the subgroup— (a) in the course of, or for the purposes of, a trade being carried on by any member of the subgroup, (b) for the purposes of a trade that any member of the subgroup is preparing to carry on, (c) with a view to any member of the subgroup acquiring or starting to carry on a trade, or (d) with a view to any member of the subgroup acquiring a significant interest in the share capital of another company that— (i) is a trading company or the holding company of a trading group or trading subgroup, and (ii) is not a member of the same group as the acquiring company. (3) Activities do not qualify as trading activities under sub-paragraph (2)(c) or (d) unless the acquisition is made, or (as the case may be) the subgroup member in question starts to carry on the trade, as soon as is reasonably practicable in the circumstances. (4) The reference in sub-paragraph (2)(d) to the acquisition of a significant interest in the share capital of another company is to an acquisition of ordinary share capital in the other company— (a) such as would make that company a member of the same subgroup as the acquiring company, or (b) such as would give the acquiring company a qualifying shareholding in a joint venture company without making the two companies members of the same group. (5) For the purposes of this paragraph the activities of the members of the subgroup shall be treated as one business (with the result that activities are disregarded to the extent that they are intra-subgroup activities). (23) (1) This paragraph applies where a company (“the company”) has a qualifying shareholding in a joint venture company. (2) In determining whether the company is a trading company— (a) its holding of shares in the joint venture company shall be disregarded, and (b) it shall be treated as carrying on an appropriate proportion— (i) of the activities of the joint venture company, or (ii) where the joint venture company is a holding company, of the activities of that company and its 51% subsidiaries. This sub-paragraph does not apply if the company is a member of a group and the joint venture company is a member of the same group. (3) In determining whether the company is a member of a trading group or the holding company of a trading group— (a) every holding of shares in the joint venture company by a member of the group having a qualifying shareholding in that company shall be disregarded, and (b) each member of the group having a qualifying shareholding in the joint venture company shall be treated as carrying on an appropriate proportion— (i) of the activities of the joint venture company, or (ii) where the joint venture company is a holding company, of the activities of that company and its 51% subsidiaries. This sub-paragraph does not apply if the joint venture company is a member of the group. (4) In determining whether the company is the holding company of a trading subgroup— (a) every holding of shares in the joint venture company by the company and any of its 51% subsidiaries having a qualifying shareholding in the joint venture company shall be disregarded, and (b) the company and each of its 51% subsidiaries having a qualifying shareholding in the joint venture company shall be treated as carrying on an appropriate proportion— (i) of the activities of the joint venture company, or (ii) where the joint venture company is a holding company, of the activities of that company and its 51% subsidiaries. This sub-paragraph does not apply if the joint venture company is a member of the same group as the company. (5) In sub-paragraphs (2)(b), (3)(b) and (4)(b) “an appropriate proportion” means a proportion corresponding to the percentage of the ordinary share capital of the joint venture company held by the company concerned. (6) In this paragraph “shares”, in relation to a joint venture company, includes securities of that company or an interest in shares in or securities of that company. (7) For the purposes of this paragraph the activities of a joint venture company that is a holding company and its 51% subsidiaries shall be treated as a single business (so that activities are disregarded to the extent that they are intra-group activities or, as the case may be, intra-subgroup activities). (24) (1) For the purposes of this Schedule a company is a “joint venture company” if, and only if— (a) it is a trading company or the holding company of a trading group or trading subgroup, and (b) there are five or fewer persons who between them hold 75% or more of its ordinary share capital. In determining whether there are five or fewer such persons as are mentioned in paragraph (b), the members of a group are treated as if they were a single company. (2) For the purposes of this Schedule— (a) a company that is not a member of a group has a “qualifying shareholding” in a joint venture company if, and only if, it holds shares or an interest in shares in the joint venture company by virtue of which it holds 10% or more of that company’s ordinary share capital; (b) a company that is a member of a group has a “qualifying shareholding” in a joint venture company if, and only if— (i) it holds ordinary share capital of the joint venture company, and (ii) the members of the group between them hold 10% or more of the ordinary share capital of that company. (25) The provisions of— (a) paragraph 14 (effect of earlier company reconstruction etc), and (b) paragraph 15 (effect of earlier demerger), have effect in relation to the requirements of paragraph 19 (requirements in relation to company invested in) as they have effect in relation to the requirement of paragraph 7 (the substantial shareholding requirement). Part 4Interpretation (26) (1) In this Schedule— (a) “company” has the meaning given by section 170(9); and (b) references to a group, or to membership of a group, shall be construed in accordance with the provisions of section 170 read as if “51 per cent" were substituted for “75 per cent". (2) References in this Schedule to a “subgroup” are to companies that would form a group but for the fact that one of them is a 51% subsidiary of another company. (3) In this Schedule “holding company”— (a) in relation to a group, means the company described in section 170 as the principal company of the group; (b) in relation to a subgroup, means a company that would be the holding company of a group but for being a 51% subsidiary of another company. (4) In this Schedule “51% subsidiary” has the meaning given by section 838 of the Taxes Act. In applying that section for the purposes of this Schedule, any share capital of a registered industrial and provident society shall be treated as ordinary share capital. (5) References in this Schedule to a “group” or “subsidiary” shall be construed with any necessary modifications where applied to a company incorporated under the law of a country or territory outside the United Kingdom. (27) In this Schedule “trade” means anything that— (a) is a trade, profession or vocation, within the meaning of the Income Tax Acts, and (b) is conducted on a commercial basis with a view to the realisation of profits. (28) For the purposes of this Schedule a “twelve-month period” means a period ending with the day before the first anniversary of the day with which, or in the course of which, the period began. (29) (1) References in this Schedule to an interest in shares are to an interest as a co-owner of shares. (2) It does not matter whether the shares are owned jointly or in common, or whether the interests of the co-owners are equal. (30) (1) This paragraph explains what is meant by an asset related to shares in a company. (2) An asset is related to shares in a company if it is— (a) an option to acquire or dispose of shares or an interest in shares in that company, or (b) a security to which are attached rights by virtue of which the holder is or may become entitled to acquire or dispose of (whether by conversion or exchange or otherwise)— (i) shares or an interest in shares in that company, or (ii) an option to acquire or dispose of shares or an interest in shares in that company, or (iii) another security falling within this paragraph, or (c) an option to acquire or dispose of any security within paragraph (b) or an interest in any such security, or (d) an interest in, or option over, any such option or security as is mentioned in paragraph (a), (b) or (c), or (e) any interest in, or option over, any such interest or option as is mentioned in paragraph (d) or this paragraph. (3) In determining whether a security is within sub-paragraph (2)(b), no account shall be taken— (a) of any rights attached to the security other than rights relating, directly or indirectly, to shares of the company in question, or (b) of rights as regards which, at the time the security came into existence, there was no more than a negligible likelihood that they would in due course be exercised to a significant extent. (4) The references in this paragraph to an interest in a security or option have a meaning corresponding to that given by paragraph 29 in relation to an interest in shares. (31) In this Schedule the expressions listed below are defined or otherwise explained by the provisions indicated:

asset related to shares	paragraph 30
company	paragraph 26(1)(a)
company invested in	paragraph 1
51% subsidiary	paragraph 26(4) and (5)
group (and member of group)	paragraph 26(1)(b) and (5)
holding company	paragraph 26(3)
interest in shares	paragraph 29
investing company	paragraph 1
joint venture company	paragraph 24(1)
qualifying shareholding (in joint venture company)	paragraph 24(2)
subgroup	paragraph 26(2)
trade	paragraph 27
trading company	paragraph 20
trading group	paragraph 21
trading subgroup	paragraph 22
twelve-month period	paragraph 28

Part 5Consequential provisions (32) Any exemption conferred by this Schedule shall be disregarded in determining whether shares are “chargeable shares”, or an asset is a “chargeable asset”, for the purposes of any enactment relating to corporation tax or capital gains tax. (33) (1) This paragraph applies where— (a) a company makes a claim under section 24(2) (assets of negligible value) in relation to shares held by it, and (b) by virtue of this Schedule any loss accruing to the company on a disposal of the shares at the time of the claim would not be an allowable loss. (2) Where this paragraph applies the company may not exercise the option under section 24(2) to specify a time earlier than the time of the claim as the time when the shares are treated as sold and reacquired by virtue of that subsection. (3) This paragraph applies to— (a) an interest in shares in a company, or (b) an asset related to shares in a company, as it applies to shares in that company. (34) (1) The exemptions conferred by this Schedule do not apply to or affect a chargeable gain or allowable loss deemed to accrue on a disposal by virtue of section 116(10)(b) (reorganisations, conversions and reconstructions: deemed accrual of gain or loss held over on earlier transaction). (2) Sub-paragraph (1) does not apply where the relevant earlier transaction was a deemed disposal and reacquisition under section 92(7) of the Finance Act 1996 (convertible securities etc). (35) (1) This paragraph applies where— (a) a company disposes of an asset in circumstances falling within section 140(4) (recovery of charge postponed on transfer of assets to non-resident company), and (b) by virtue of this Schedule any gain accruing to the company on the disposal would not be a chargeable gain. (2) Where this paragraph applies the amount by which the consideration received on the disposal would be treated as increased by virtue of section 140(4) shall instead be treated as accruing to the company, at the time of the disposal, as a chargeable gain to which this Schedule does not apply. (3) Any reference in section 140 to an amount being brought or taken into account under or in accordance with subsection (4) of that section includes a reference to an amount being treated, by virtue of sub-paragraph (2) above, as accruing as a chargeable gain. (36) (1) Where— (a) an asset acquired by a company otherwise than as trading stock of a trade carried on by it is appropriated by the company for the purposes of the trade as trading stock (whether on the commencement of the trade or otherwise), and (b) if the company had then sold the asset for its market value, a chargeable gain or allowable loss would have accrued to the company but for an exemption conferred by this Schedule, the company is treated for the purposes of the enactments relating to chargeable gains as if it had thereby disposed of the asset for its market value. (2) Section 173 (transfers within a group: trading stock) applies in relation to this paragraph as it applies in relation to section 161 (appropriations to and from stock). (37) (1) This paragraph applies where— (a) a company disposes of an asset, (b) the expenditure allowable in computing a gain or loss on that disposal falls to be reduced because of a claim for relief under section 165 (gifts relief) in relation to an earlier disposal, and (c) by virtue of this Schedule any gain accruing to the company on the disposal mentioned in paragraph (a) would not be a chargeable gain. (2) Where this paragraph applies the amount of the held-over gain, or an appropriate proportion of it, shall be treated as accruing to the company, at the time of the disposal mentioned in sub-paragraph (1)(a), as a chargeable gain to which this Schedule does not apply. (3) An “appropriate proportion” means a proportion determined on a just and reasonable basis having regard to the subject matter of the disposal mentioned in sub-paragraph (1)(a) and the subject matter of the earlier disposal that was the subject of the claim for relief under section 165. (4) In this paragraph “held-over gain” has the same meaning as in section 165. (38) (1) Where— (a) a company, as a result of ceasing at any time (“the time of degrouping”) to be a member of a group, is treated by section 179(3) as having sold and immediately reacquired an asset, and (b) if the company owning the asset at the time of degrouping had disposed of it immediately before that time, any gain accruing on the disposal would by virtue of this Schedule not have been a chargeable gain, section 179(3) shall have effect as if it provided for the deemed sale and reacquisition to be treated as taking place immediately before the time of degrouping. (2) Where— (a) a company, as a result of ceasing at any time (“the relevant time”) to satisfy the conditions in section 179(7), is treated by section 179(6) as having sold and immediately reacquired an asset, and (b) if the company owning the asset at the relevant time had disposed of it immediately before that time, any gain accruing on the disposal would by virtue of this Schedule not have been a chargeable gain, section 179(6) shall have effect as if it provided for the deemed sale and reacquisition to be treated as taking place immediately before the relevant time. (3) Any reference in this paragraph to a disposal or other event taking place immediately before the time of degrouping or the relevant time is to its taking place immediately before that time but on the same day. (39) (1) No gain or loss shall be treated as arising under the FOREX matching regulations on a disposal on which by virtue of this Schedule any gain would not be a chargeable gain. (2) The “FOREX matching regulations” means any regulations made under Schedule 15 to the Finance Act 1993 (exchange gains and losses: alternative method of calculation).

Part 2 — Consequential amendments

Degrouping: time of accrual of chargeable gain or allowable loss

2

In section 179(4) of the Taxation of Chargeable Gains Act 1992 (c. 12) (deemed sale and reacquisition on company ceasing to be member of group: time when chargeable gain or allowable loss treated as accruing), for “which, apart from this subsection, would accrue" substitute “ accruing ”.

Treatment of furnished holiday lettings

3

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

Overseas life insurance companies

4

In Schedule 7B of the Taxation of Chargeable Gains Act 1992 (c. 12) (modification of Act in relation to overseas life insurance companies), after paragraph 15 add—

(16) In Schedule 7AC, in paragraph 3(2)(c)(ii), the words “section 11(2)(b), (c) or (d) of the Taxes Act" shall be treated as substituted for the words “section 10(3)".

Corporate venturing scheme

5

In Schedule 15 to the Finance Act 2000 (c. 17) (the corporate venturing scheme), in paragraphs 84(1) and 85(1) after “(see paragraph 83" insert “ and paragraph 4 of Schedule 7AC to the Taxation of Chargeable Gains Act 1992 ”.

SCHEDULE 9

Part 1 — Provisions replacing sections 135 and 136 of the Taxation of Chargeable Gains Act 1992

1

For section 135 of the Taxation of Chargeable Gains Act 1992 (exchange of securities for those in another company) substitute—

(135) (1) This section applies in the following circumstances where a company (“company B”) issues shares or debentures to a person in exchange for shares in or debentures of another company (“company A”). (2) The circumstances are: Case 1 Where company B holds, or in consequence of the exchange will hold, more than 25% of the ordinary share capital of company A. Case 2 Where company B issues the shares or debentures in exchange for shares as the result of a general offer— (a) made to members of company A or any class of them (with or without exceptions for persons connected with company B), and (b) made in the first instance on a condition such that if it were satisfied company B would have control of company A. Case 3 Where company B holds, or in consequence of the exchange will hold, the greater part of the voting power in company A. (3) Where this section applies, sections 127 to 131 (share reorganisations etc) apply with the necessary adaptations as if company A and company B were the same company and the exchange were a reorganisation of its share capital. (4) In this section “ordinary share capital” has the meaning given by section 832(1) of the Taxes Act and also includes— (a) in relation to a unit trust scheme, any rights that are treated by section 99(1)(b) of this Act (application of Act to unit trust schemes) as shares in a company, and (b) in relation to a company that has no share capital, any interests in the company possessed by members of the company. (5) This section applies in relation to a company that has no share capital as if references to shares in or debentures of the company included any interests in the company possessed by members of the company. (6) This section has effect subject to section 137(1) (exchange must be for bona fide commercial reasons and not part of tax avoidance scheme).

Scheme of reconstruction involving issue of securities

2

For section 136 of the Taxation of Chargeable Gains Act 1992 (c. 12) (reconstruction or amalgamation involving issue of securities) substitute—

(136) (1) This section applies where— (a) an arrangement between a company (“company A”) and— (i) the persons holding shares in or debentures of the company, or (ii) where there are different classes of shares in or debentures of the company, the persons holding any class of those shares or debentures, is entered into for the purposes of, or in connection with, a scheme of reconstruction, and (b) under the arrangement— (i) another company (“company B”) issues shares or debentures to those persons in respect of and in proportion to (or as nearly as may be in proportion to) their relevant holdings in company A, and (ii) the shares in or debentures of company A comprised in relevant holdings are retained by those persons or are cancelled or otherwise extinguished. (2) Where this section applies— (a) those persons are treated as exchanging their relevant holdings in company A for the shares or debentures held by them in consequence of the arrangement, and (b) sections 127 to 131 (share reorganisations etc) apply with the necessary adaptations as if company A and company B were the same company and the exchange were a reorganisation of its share capital. For this purpose shares in or debentures of company A comprised in relevant holdings that are retained are treated as if they had been cancelled and replaced by a new issue. (3) Where a reorganisation of the share capital of company A is carried out for the purposes of the scheme of reconstruction, the provisions of subsections (1) and (2) apply in relation to the position after the reorganisation. (4) In this section— (a) “scheme of reconstruction” has the meaning given by Schedule 5AA to this Act; (b) references to “relevant holdings” of shares in or debentures of company A are— (i) where there is only one class of shares in or debentures of the company, to holdings of shares in or debentures of the company, and (ii) where there are different classes of shares in or debentures of the company, to holdings of a class of shares or debentures that is involved in the scheme of reconstruction (within the meaning of paragraph 2 of Schedule 5AA); (c) references to shares or debentures being retained include their being retained with altered rights or in an altered form, whether as the result of reduction, consolidation, division or otherwise; and (d) any reference to a reorganisation of a company’s share capital is to a reorganisation within the meaning of section 126. (5) This section applies in relation to a company that has no share capital as if references to shares in or debentures of the company included any interests in the company possessed by members of the company. (6) This section has effect subject to section 137(1) (scheme of reconstruction must be for bona fide commercial reasons and not part of tax avoidance scheme).

Meaning of “scheme of reconstruction”

3

After Schedule 5A to the Taxation of Chargeable Gains Act 1992 insert—

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Finance Act 2002

3

4

5

6

7

8

9

10

Part 2 — Minor amendments and transitional provisions

Amendment in the Excise Duties (Surcharges or Rebates) Act 1979

11

Amendments in Schedule 5 to the Finance Act 1994

12

Duty charged before 31st March 2002

13

Notifications under paragraph 4(4) of Schedule 1 to that Act of premises used in connection with coupon betting

14

SCHEDULE 5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

SCHEDULE 6

Share options

1

Credit-tokens and non-cash vouchers

2

3

Taxation of benefit where income received free of tax

4

Benefits in connection with termination of employment or change in duties or emoluments

5

Priority between charges under sections 148 and 595 of the Taxes Act 1988

6

SCHEDULE 7

SCHEDULE 8

Part 1 — New Schedule 7AC to the Taxation of Chargeable Gains Act 1992

1

Part 2 — Consequential amendments

Degrouping: time of accrual of chargeable gain or allowable loss

2

Treatment of furnished holiday lettings

3

Overseas life insurance companies

4

Corporate venturing scheme

5

SCHEDULE 9

Part 1 — Provisions replacing sections 135 and 136 of the Taxation of Chargeable Gains Act 1992

Share exchanges

1

Scheme of reconstruction involving issue of securities

2

Meaning of “scheme of reconstruction”

3