Finance Act 2003

Penalty for failure to provide information etc

6

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

Transitory provision: expenditure incurred etc before first order made

7

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

SCHEDULE 31

Part 1 — Small and medium-sized enterprises: Schedule 20 to Finance Act 2000

Introductory

1

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

Required minimum aggregate expenditure: reduction from £25,000 to £10,000

2

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

Required minimum aggregate expenditure: inclusion of new class of expenditure

3

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

Qualifying R&D expenditure: expenditure on externally provided workers

4

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

Staffing costs: persons partly engaged directly and actively in relevant R&D

5

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

Qualifying expenditure on externally provided workers

6

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

Qualifying expenditure on sub-contracted R&D: externally provided workers

7

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

Part 2 — Large companies: Part 1 of Schedule 12 to Finance Act 2002

Introductory

8

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

Required minimum aggregate expenditure: reduction from £25,000 to £10,000

9

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

Qualifying expenditure on externally provided workers

10

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

Part 3 — Work sub-contracted to SMEs: Part 2 of Schedule 12 to Finance Act 2002

Introductory

11

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

Required minimum aggregate expenditure: reduction from £25,000 to £10,000

12

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

Required minimum aggregate expenditure: inclusion of new class of expenditure

13

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

R&D directly undertaken by SME: qualifying expenditure on externally provided workers

14

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

Part 4 — Entitlement of SME to certain relief available to large companies

Insertion of Part 2A of Schedule 12 to the Finance Act 2002

15

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

Part 5 — Supplementary: amendments to Parts 3 to 6 of Schedule 12 to Finance Act 2002

Introductory

16

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

Deduction in computing profits of trade

17

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

Refunds of contributions to independent research and development

18

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

Meaning of “qualifying expenditure on externally provided workers”

19

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

Part 6 — Expenditure on vaccine research etc: Schedule 13 to Finance Act 2002

Introductory

20

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

Reduction of required qualifying expenditure from £25,000 to £10,000

21

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

Direct research and development: qualifying expenditure on externally provided workers

22

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

Meaning of “qualifying expenditure on externally provided workers”

23

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

Relevant expenditure of sub-contractor: qualifying expenditure on externally provided workers

24

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

SCHEDULE 32

The ring fence: amendments to the provisions about capital allowances and ship leasing

1

• (1) In Schedule 22 to the Finance Act 2000 (c. 17) (tonnage tax), Part 10 (the ring fence: capital allowances: ship leasing) is amended as follows.

• (2) Omit the word “finance” from the expression “finance lease” in paragraphs 89(1), 90(1), 92(1), 93(1), 94(1), 98(1)(a) and 99(1)(a).

• (3) At the end of sub-paragraph (1) of paragraph 89 (introduction to Part 10) insert—

“ This is subject to paragraph 89A (exception for ordinary charters). ”.

• (4) For sub-paragraph (2) of that paragraph substitute—

(2) In this Part of this Schedule “lease” means any arrangements that provide for a ship to be leased or otherwise made available by a person (“the lessor”) to another person (“the lessee”).

.

• (5) After that paragraph insert—

(89A) (1) Paragraphs 94 to 102, and paragraph 89(1) so far as relating to those paragraphs, do not apply in the following cases. (2) The first case is where the ship is chartered out by a person who is responsible— (a) for the operation of the ship, including the appointment of the master and those members of the crew engaged in navigation, throughout the period of the charter, and (b) for defraying all expenses in connection with the ship throughout that period, or substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period. For the purposes of this sub-paragraph a person is “responsible” if he is responsible as principal or if he appoints another person, other than the lessee or a person connected with the lessee, to be responsible in his place. (3) The second case is where— (a) the ship is chartered out by a person acting in the course of a trade that consists of, or to a significant extent includes, operating ships, and (b) the conditions in sub-paragraph (4) are met. (4) Those conditions are— (a) that the period of the charter does not exceed seven years, and there is no provision or agreement under which it could be extended beyond seven years; (b) that the period of the charter, together with any other periods in the same ten years during which the ship is chartered out to the lessee or a person connected with him, does not exceed seven years in total; (c) that there are no arrangements under which the lessee or a person connected with him may acquire the ship, whether directly or indirectly, from the lessor. In paragraph (b) “the same ten years” means any period of ten years that includes the period of the charter mentioned in that paragraph. (5) References in this paragraph to the period of a charter are to the term specified in the lease or, if longer, the actual period during which the ship is chartered. (6) Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of this paragraph.

.

Consequential amendments

2

• (1) In paragraph 41(4) of that Schedule (the requirement not to enter into tax avoidance arrangements: exemption for finance leases)—

• (a) in the first sentence omit “finance”;

• (b) for the second sentence substitute— “ In this sub-paragraph “lease”, and “lessor” in relation to a lease, have the meaning given by paragraph 89(2). ”.

• (2) In paragraph 147 (index of defined expressions)—

• (a) omit the entry for “finance lease (and lessor and lessee) (in Part X)”;

• (b) insert at the appropriate place—

lease (and lessor and lessee) (in Part X)	paragraph 89(2)

.

Commencement and temporary provision

3

• (1) Subject to paragraph 4(2), the amendments made by paragraphs 1 and 2 apply in relation to any lease entered into on or after 19th December 2002.

• (2) In sub-paragraph (4)(b) of the paragraph 89A inserted by paragraph 1(5) above, the reference to any other periods during which the ship is chartered out does not include any period during which it is chartered out under a lease entered into before 19th December 2002.

4

• (1) This paragraph applies in relation to any lease entered into on or after 19th December 2002 and before 16 April 2003.

• (2) Part 10 of the Schedule 22 to the Finance Act 2000 (c. 17) has effect as if, instead of the paragraph inserted after paragraph 89 by paragraph 1(5) above, the following paragraph were inserted—

(89A) (1) Paragraph 89(1), and the provisions of this Part of this Schedule listed there, do not apply in the following cases. (2) The first case is where the ship is chartered out by a person who is responsible— (a) for the operation of the ship, including the appointment of the master and those members of the crew engaged in navigation, throughout the period of the charter, and (b) for defraying all expenses in connection with the ship throughout that period, or substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period. For the purposes of this sub-paragraph a person is “responsible” if he is responsible as principal or if he appoints another person, other than the lessee or a person connected with the lessee, to be responsible in his place. (3) The second case is where— (a) the ship is chartered out to another person (“the charterer”) because of short-term over-capacity, (b) the person chartering out the ship does so in the course of a trade that consists of or includes operating ships, and (c) the conditions in sub-paragraph (4) are met. (4) Those conditions are— (a) that the period of the charter does not exceed three years, and there is no provision or agreement under which it could be extended beyond three years; (b) that the period of the charter, together with any other periods in the same five years during which the ship is chartered out to the charterer or a person connected with him, does not exceed three years in total; (c) that neither the charterer nor any person connected with him has an option to purchase the ship. (5) In sub-paragraph (4)(b)— (a) the reference to any other periods during which the ship is chartered out does not include any period during which it is chartered out under a lease entered into before 19th December 2002; (b) “the same five years” means any period of five years that includes the period of the charter mentioned in that sub-paragraph. (6) References in this paragraph to the period of a charter are to the term specified in the lease or, if longer, the actual period during which the ship is chartered. (7) Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of this paragraph.

.

• (3) Paragraph 93(1) of that Schedule (certificates required to support claim by lessor) has effect as if after paragraph (a) there were inserted—

(aa) that the lease is such that, by virtue of paragraph 89A (exception for ordinary charters), paragraph 89(1) does not apply, or

.

5

In paragraphs 3 and 4 “lease” means any arrangements that provide for a ship to be leased or otherwise made available by one person to another.

SCHEDULE 33

Case I profits

1

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

2

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

3

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

4

• (1) In section 83AA of the Finance Act 1989 (c. 26) (amounts added to long-term insurance fund of a company in excess of company’s loss), omit—

• (a) subsections (3) to (5),

• (b) subsection (6)(a),

• (c) subsection (7)(b) and the word “and” before it, and

• (d) in subsection (10), the definitions of “the relevant accounting period” and “the transferor company”.

• (2) Sub-paragraph (1) has effect for periods of account beginning on or after 1st January 2003.

5

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

6

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

• (2) Section 89 of that Act (meaning of policy holders' share of profits) is amended as follows.

• (3) In subsection (1), for the words after “references to” substitute—

(a) in a case where there are no Case I profits of the company for the period in respect of its life assurance business, the amount of the relevant profits, and (b) in any other case, the amount arrived at in accordance with subsection (1A) below.

.

• (4) After that subsection insert—

(1A) An amount is arrived at in accordance with this subsection by— (a) deducting from any profits of the company for the period chargeable under Case VI of Schedule D under sections 436, 439B and 441 of the Taxes Act 1988 (as reduced by any losses under those sections and any charges on income referable to any category of business other than basic life assurance and general annuity business) so much of the Case I profits of the company for the period in respect of its life assurance business as does not exceed the amount of any profits of the company for the period so chargeable, and (b) deducting any remaining Case I profits of the company for the period in respect of its life assurance business from any BLAGAB profits of the company for the period. (1B) For the purposes of this section, the BLAGAB profits of a company for an accounting period are the income and chargeable gains referable to the company’s basic life assurance and general annuity business reduced by the aggregate amount of— (a) any non-trading deficit on the company’s loan relationships, (b) expenses of management falling to be deducted under section 76 of the Taxes Act 1988, and (c) charges on income, so far as referable to the company’s basic life assurance and general annuity business.

.

• (5) In subsection (2), for “subsection (1)” substitute “ subsections (1) and (1A) ”.

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) In—

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

• (b) the second sentence of section 434A(3) of that Act (computation of losses and limitation on relief),

for “88” substitute “ 89 ”.

• (8) In section 434A(2)(a)(i) of the Taxes Act 1988 (computation of losses and limitation on relief), for “for the period, otherwise than in accordance with those provisions, the profits or losses of the company’s life assurance business” substitute “ , otherwise than in accordance with those provisions, the relevant profits (within the meaning of section 88(1) of the Finance Act 1989) of the company for the period ”.

• (9) In section 437(1A) of the Taxes Act 1988 (general annuity business), for “profits for any accounting period of a company’s life assurance business” substitute “ relevant profits (within the meaning of section 88(1) of the Finance Act 1989) of an insurance company for any accounting period ”.

• (10) In paragraph 16(1) of Schedule 7 to the Finance Act 1991 (c. 31) (transitional relief for old general annuity contracts), for “profits for any accounting period of an insurance company’s life assurance business” substitute “ relevant profits (within the meaning of section 88(1) of the Finance Act 1989) of an insurance company for any accounting period ”.

• (11) Section 89(1B) of the Finance Act 1989 (c. 26) (inserted by sub-paragraph (4)) has effect for the purposes of section 210A of the Taxation of Chargeable Gains Act 1992 (c. 12) (inserted by paragraph 14(1)) in relation to any accounting period of a company if it is necessary under that section to determine the company’s BLAGAB profits for the period.

• (12) But, subject to that, this paragraph has effect for accounting periods ending on or after 9th April 2003.

7

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

8

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

9

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

10

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

11

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

12

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

Rate of tax on policy holders' share of life assurance profits

13

• (1) The Finance Act 1989 is amended as follows.

• (2) In section 88(1) (corporation tax rate on policy holders' share of relevant profits of companies carrying on life assurance business to be basic rate of income tax)—

• (a) omit “and section 88A”, and

• (b) for “basic” substitute “ lower ”.

• (3) Omit section 88A (cases where tax rate already is lower rate).

• (4) In section 89(1) (meaning of “policy holders' share of profits”)—

• (a) for “sections 88 and 88A” substitute “ section 88 ”, and

• (b) omit “or, as the case may be, basic life assurance and general annuity business”.

• (5) The Taxes Act 1988 is amended as follows.

• (6) In section 438B(5) (income or gains arising from property investment LLP)—

• (a) omit paragraph (b) and the word “and” before it, and

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

• (7) Section 755A (controlled foreign companies: chargeable profits and creditable tax apportioned to company carrying on life assurance business) is amended as follows.

• (8) In subsection (3), for “88A(1)” substitute “ 88(1) ”.

• (9) For subsection (11) substitute—

(11) For the purposes of this section the policy holders' part of any BLAGAB apportioned profit is— (a) where subsection (11A) below applies, the whole of that profit, and (b) in any other case, the relevant fraction (within the meaning of subsection (11B) below) of that profit. (11A) This subsection applies if— (a) the UK company’s life assurance business is mutual business, (b) the policy holders' share of the UK company’s relevant profits for the relevant accounting period is equal to all those profits, or (c) the policy holders' share of the UK company’s relevant profits for the relevant accounting period is more than its BLAGAB profits for that period. (11B) The relevant fraction for the purposes of subsection (11)(b) above is the fraction arrived at by dividing— (a) the policy holders' share of the UK company’s relevant profits for the relevant accounting period, by (b) the UK company’s BLAGAB profits for that period. (11C) In subsections (11A) and (11B) above— (a) references to the policy holders' share of the UK company’s share of the relevant profits are to be construed in accordance with sections 88(3) and 89 of the Finance Act 1989, and (b) references to the UK company’s BLAGAB profits are to be construed in accordance with section 89(1B) of that Act.

.

• (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (11) This paragraph has effect for the financial year 2003 and subsequent financial years.

Chargeable gains

14

• (1) In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 210 insert—

(210A) (1) Section 8(1) has effect in relation to insurance companies subject to the provisions of this section. (2) Non-BLAGAB allowable losses accruing to an insurance company are not allowable as a deduction from the policy holders' share of the BLAGAB chargeable gains accruing to the company. (3) BLAGAB allowable losses accruing to an insurance company are allowable as a deduction from non-BLAGAB chargeable gains accruing to the company as permitted by the following provisions of this section (and not otherwise). (4) They are allowable as a deduction from only so much of non-BLAGAB chargeable gains accruing to the company in an accounting period as exceeds the aggregate of— (a) non-BLAGAB allowable losses accruing to the company in the accounting period, and (b) non-BLAGAB allowable losses previously accruing to the company which have not been allowed as a deduction from chargeable gains accruing in any previous accounting period. (5) And they are allowable as a deduction from non-BLAGAB chargeable gains accruing to the company in an accounting period only to the extent that they do not exceed the permitted amount for the accounting period. (6) The permitted amount for the first accounting period of an insurance company in relation to which this section has effect is the aggregate of— (a) the amount by which shareholders' share for that accounting period of BLAGAB allowable losses accruing to the company in the accounting period exceeds the shareholders' share of BLAGAB chargeable gains so accruing, and (b) the shareholder’s share for the immediately preceding accounting period of BLAGAB allowable losses previously accruing to the company which have not been allowed as a deduction from chargeable gains accruing in that immediately preceding accounting period or any earlier accounting period. (7) The permitted amount for any subsequent accounting period of the company is arrived at by— (a) deducting from the permitted amount for the immediately preceding accounting period the amount of any BLAGAB allowable losses allowed as a deduction from non-BLAGAB chargeable gains accruing to the company in the immediately preceding accounting period, and (b) adjusting the result in accordance with subsection (8) or (9) below. (8) If the BLAGAB chargeable gains accruing to the company in the subsequent accounting period exceed the BLAGAB allowable losses so accruing, the amount arrived at under subsection (7)(a) above is reduced by a fraction of which— (a) the denominator is the BLAGAB allowable losses accruing to the company in any previous accounting period which have not been allowed as a deduction from chargeable gains accruing to the company in any previous accounting period, and (b) the numerator is so many of those allowable losses as are allowed as a deduction from BLAGAB chargeable gains accruing to the company in the accounting period. (9) If the BLAGAB allowable losses accruing to the company in the subsequent accounting period exceed the BLAGAB chargeable gains so accruing, the amount arrived at under subsection (7)(a) above is increased by the shareholders' share of the amount by which those allowable losses exceed those chargeable gains. (10) For the purposes of this section the policy holders' share of chargeable gains or allowable losses accruing to an insurance company in an accounting period— (a) if the policy holders' share of the relevant profits for the accounting period exceeds the BLAGAB profits of the company for the period (within the meaning of section 89(1B) of the Finance Act 1989), is the whole amount of the chargeable gains or allowable losses, and (b) otherwise, is the same proportion of that whole amount as the policy holders' share of the relevant profits of the company for the accounting period bears to those relevant profits. (11) In arriving at the policy holders' share of chargeable gains accruing to an insurance company under subsection (10) above there is to be ignored— (a) any deduction under section 202(9) (mineral leases: capital losses), (b) any reduction under section 213(3) (spreading of losses from deemed disposal of holdings of unit trust etc), and (c) any amount carried back under paragraph 4(3) of Schedule 11 to the Finance Act 1996 (non-trading deficit on loan relationships). (12) For the purposes of this section the shareholders' share of chargeable gains or allowable losses in relation to an accounting period of an insurance company is the proportion of the whole which is not represented by the policy holders' share of them in relation to the accounting period. (13) In this section— - “BLAGAB allowable losses”, in relation to an insurance company, means allowable losses referable to the company’s basic life assurance and general annuity business, - “BLAGAB chargeable gains”, in relation to an insurance company, means chargeable gains referable to the company’s basic life assurance and general annuity business, - “non-BLAGAB allowable losses”, in relation to an insurance company, means allowable losses of the company which are not BLAGAB allowable losses, - “non-BLAGAB chargeable gains”, in relation to an insurance company, means chargeable gains of the company which are not BLAGAB chargeable gains, and - “the relevant profits” and “the policy holders' share of the relevant profits” have the same meaning as they have for the purposes of subsection (1) of section 88 of the Finance Act 1989 by virtue of subsection (3) of that section and section 89 of that Act.

.

• (2) Sub-paragraph (1) has effect to limit the deductions which may be made from chargeable gains accruing in—

• (a) any accounting period of an insurance company beginning on or after 23rd December 2002, and

• (b) any accounting period of an insurance company beginning before that date but ending on or after it,

in respect of allowable losses accruing in any accounting period (whenever beginning or ending).

• (3) In relation to an accounting period within sub-paragraph (2)(b) the limitations imposed by virtue of sub-paragraph (1) apply only as respects chargeable gains accruing on or after 23rd December 2002.

15

• (1) In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 210A (inserted by paragraph 14(1)) insert—

(210B) (1) Subsections (2) to (4) below apply in a case where, within a period of 10 days, an insurance company disposes of a number of section 440A securities and (whether subsequently or previously) acquires a number of section 440A securities if— (a) the securities disposed of decrease the size of a chargeable section 440A holding, (b) the securities acquired increase the size of the same chargeable section 440A holding, and (c) (apart from this section) an allowable loss would accrue on the disposal. (2) The securities disposed of shall be identified with the securities acquired. (3) The securities disposed of shall be identified with securities acquired before the disposal rather than securities acquired after the disposal and— (a) in the case of securities acquired before the disposal, with those acquired later rather than those acquired earlier, and (b) in the case of securities acquired after the disposal, with those acquired earlier rather than those acquired later. (4) Where securities acquired could be identified with securities disposed of either at an earlier or at a later date, they shall be identified with the former rather than the latter; and the identification of securities acquired with securities disposed of on any occasion shall preclude their identification with securities comprised in a later disposal. (5) Subsections (2) to (4) above have effect subject to section 105(1). (6) Subsections (2) to (4) above do not apply to— (a) securities which are section 212 assets within the meaning of section 214(1) (rights under authorised unit trusts and interests in offshore funds), or (b) securities deemed by section 440 of the Taxes Act to be disposed of and immediately re-acquired by virtue of paragraph 3 of Schedule 19AA to the Taxes Act (assets becoming or ceasing to be assets of overseas life assurance fund). (7) Subsections (2) to (4) above do not apply if— (a) the securities disposed of are linked assets appropriated to a BLAGAB internal linked fund, (b) the securities acquired are, on acquisition, appropriated to that or another internal linked fund, and (c) the disposal and acquisition are made with a view to adjusting the value of the assets of that fund, or of those funds, in order to match its or their liabilities. (8) In this section— - “BLAGAB internal linked fund” means an internal linked fund all the assets appropriated to which are linked solely to basic life assurance and general annuity business, - “chargeable section 440A holding” means a holding which is a separate holding by virtue of subsection (2)(a)(iii) or (d) of section 440A of the Taxes Act (and subsections (3) and (4) of that section), - “internal linked fund” has the same meaning as in section 432ZA of the Taxes Act, and - “section 440A securities” means securities within the meaning of section 440A of the Taxes Act.

.

• (2) Sub-paragraph (1) has effect in relation to disposals on or after 23rd December 2002.

• (3) But sub-paragraph (1) has effect in relation to disposals made by an insurance company during the period—

• (a) beginning with 23rd December 2002, and

• (b) ending with 31st December 2002,

only if the amount of the allowable losses referable to the company’s life assurance business which would have accrued to the company on the disposals (but for that sub-paragraph) would have been at least £10 million.

16

• (1) Section 213 of the Taxation of Chargeable Gains Act 1992 (c. 12) (spreading of gains and losses under section 212) is amended as follows.

• (2) In subsection (3)—

• (a) for “subsection (3A)” substitute “ subsection (8H) ”,

• (b) in paragraph (b), for “one of the next 6” substitute “ either of the next 2 ” and for “subsection” substitute “ section ”,

• (c) in paragraph (c), for “any intervening accounting period” substitute “ the intervening accounting period (if there is one) ”, and

• (d) in paragraph (ca), for “none of the intervening accounting periods is” substitute “ the intervening accounting period (if there is one) is not ”.

• (3) Omit subsections (3A) and (3B).

• (4) For subsection (5) substitute—

(4A) The following provisions apply where an insurance business transfer scheme has effect to transfer business which consists of the effecting or carrying out of contracts of long-term insurance from one person (“the transferor”) to another (“the transferee”). (5) Subject to subsections (5A) to (7) below, any chargeable gain or allowable loss which (assuming that the transferor had continued to carry on the business transferred) would have accrued to the transferor by virtue of subsection (1) above after the transfer shall instead be deemed to accrue to the transferee.

.

• (5) After subsection (8) insert—

(8A) Subsection (8B) below applies where— (a) immediately before the transfer the transferee did not carry on business consisting of the effecting or carrying out of contracts of long-term insurance, (b) the transferor and the transferee are, at the time of the transfer, members of the same group, (c) the net amount for the accounting period of the transferor ending with the day of the transfer, or for the immediately preceding accounting period of the transferor, (“the relevant pre-transfer period of the transferor”) represents an excess of gains over losses, (d) the net amount for the accounting period of the transferee in which the transfer takes place, or for the immediately following accounting period of the transferee, (“the relevant post-transfer period of the transferee”) represents an excess of losses over gains (after taking account of any reductions made by virtue of this section), and (e) within 2 years after the end of the relevant post-transfer period of the transferee, the transferor and the transferee make a joint election in respect of the whole or part of the net amount for that period by notice to an officer of the Board. (8B) Subject to subsections (8C) to (8E) and (8H) below, the net amounts for both the relevant pre-transfer period of the transferor and the relevant post-transfer period of the transferee shall be reduced by the amount in respect of which the election is made. (8C) Subsection (8B) above does not apply if— (a) the relevant post-transfer period of the transferee is the accounting period immediately following that in which the transfer takes place, and (b) the relevant pre-transfer period of the transferor is the accounting period immediately preceding that ending with the day of the transfer. (8D) If— (a) the relevant post-transfer period of the transferee is the accounting period immediately following that in which the transfer takes place, and (b) the relevant pre-transfer period of the transferor is the accounting period ending with the day of the transfer, subsection (8B) above applies only if the conditions in subsection (8F) below are satisfied in relation to the accounting period of the transferee in which the transfer takes place. (8E) If— (a) the relevant post-transfer period of the transferee is the accounting period in which the transfer takes place, and (b) the relevant pre-transfer period of the transferor is the accounting period immediately preceding that ending with the day of the transfer, subsection (8B) above applies only if the conditions in subsection (8F) below are satisfied in relation to the accounting period of the transferor ending with the day of the transfer. (8F) The conditions referred to in subsections (8D) and (8E) above are that— (a) there is (after taking account of any reductions made by virtue of this section) no net amount for the accounting period, and (b) the company whose accounting period it is did not join a group of companies in the accounting period. (8G) A copy of the notice containing an election under subsection (8A)(e) above must accompany the tax return for the relevant post-transfer period of the transferee; and paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims and elections for corporation tax purposes) do not apply to such an election. (8H) Subsections (3) and (8A) and (8B) above have effect where the company, or the transferee, in question joins a group of companies in the accounting period for which the net amount represents an excess of losses over gains as if a claim or election could not be made in respect of that net amount except to the extent (if any) that the net amount is an amount which, assuming there to be gains accruing to the company or transferee immediately after the beginning of that period, would fall to be treated under paragraph 4 of Schedule 7AA as a qualifying loss in relation to those gains. (8I) References in this section to a company joining a group of companies are to be construed in accordance with paragraph 1 of Schedule 7AA as if those references were contained in that Schedule; and in subsection (8A)(b) above “group” has the same meaning as in that Schedule.

.

• (6) This paragraph has effect where the accounting period for which the net amount represents an excess of losses over gains is an accounting period beginning on or after 1st January 2003.

17

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

Transfers of business

18

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

19

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

20

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

21

• (1) In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 211 insert—

(211ZA) (1) This section applies where— (a) an insurance business transfer scheme has effect to transfer business consisting of or including basic life assurance and general annuity business from one person (“the transferor”) to another (“the transferee”) or more than one others (“the transferees”), and (b) the transferor has relevant unused losses. (2) For the purposes of subsection (1)(b) above the transferor has relevant unused losses if— (a) BLAGAB allowable losses accrue to the transferor in the accounting period ending with the day of the transfer or have so accrued in any earlier accounting period, and (b) they are not deducted from chargeable gains accruing to the transferor in that accounting period and have not been deducted from chargeable gains so accruing in any previous accounting period. (3) Subject as follows— (a) for the purposes of ascertaining the transferor’s total profits for any accounting period after that in which the transfer takes place, the relevant unused losses are deemed not to have accrued to the transferor, but (b) (instead) they are treated as accruing to the transferee (in accordance with subsection (4) below). (4) The losses treated as accruing to the transferee under subsection (3)(b) above shall be deemed to be BLAGAB allowable losses accruing to the transferee in the accounting period of the transferee in which the transfer takes place. (5) But those losses are not allowable as a deduction from chargeable gains accruing before the transfer takes place. (6) For the purposes of section 210A (ring-fencing of losses), the shareholders' share of those losses is to be taken to be the same proportion as would be the shareholders' share of them if they had remained losses of the transferor. (7) If only part of the transferor’s basic life assurance and general annuity business is transferred, subsection (3) above applies as if the references to the relevant unused losses were to such part of the relevant unused losses as is appropriate. (8) If the transfer is to more than one others, subsection (3)(b) above applies as if the reference to the relevant unused losses being treated as accruing to the transferee were to such part of the relevant unused losses as is appropriate being treated as accruing to each of the transferees. (9) Any question arising as to the operation of subsection (7) or (8) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but both the transferor and the transferee (or the one of the transferees concerned) shall be entitled to appear and be heard or to make representations in writing. (10) In this section “BLAGAB allowable losses” means allowable losses referable to the transferor’s basic life assurance and general annuity business.

.

• (2) Sub-paragraph (1) has effect in relation to insurance business transfer schemes taking place on or after 1st January 2003.

22

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

23

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

24

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

Meaning of “investment reserve” etc

25

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

26

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

27

In paragraph 4(5) of Schedule 19AA to the Taxes Act 1988 (overseas life assurance fund), in the definition of “investment reserve”, for paragraphs (a) and (b) substitute—

(a) the value of the liabilities of that business, and (b) any money debts of the company not within paragraph (a) above which are owed in respect of that business;

.

28

Paragraphs 25 to 27 have effect in relation to periods of account beginning on or after 1st January 2003.

Meaning of “period of account”

29

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

Rationalisation of interpretation provisions

30

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

31

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

32

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

SCHEDULE 34

Part 1 — Group life policies

Exception of certain group life policies from Chapter 2 of Part 13

1

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

Excepted group life policies

2

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

Retrospective exception of past and present pure protection group life policies

3

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

Existing group life policies: time for compliance with the conditions in section 539A

4

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

Deaths before 6th April 2004: period for insurer to give certificate under section 552(1)(a)

5

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

Part 2 — Charitable and non-charitable trusts

Interpretation

6

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

Method of charging gain to tax

7

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

Method of charging gain to tax: multiple interests

8

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

Deemed surrender of certain loans

9

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

Right of individual to recover tax from trustees

10

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

Right of company to recover tax from trustees

11

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

Section 547(1)(cc) and (d)(ia): exception for certain old policies and contracts

12

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

Part 3 — Meaning of “life annuity”

Restriction of “life annuity” to contracts to which section 656 of the Taxes Act 1988 applies

13

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

Part 4 — Rollover of gain on maturity into new policy

Repeal of section 540(2) of the Taxes Act 1988

14

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

Saving for certain policies maturing on or after 9th April 2003

15

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

SCHEDULE 35

Application of the lower rate

1

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

Method of charging gains from policies of life insurance etc to tax

2

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

Relief where gain charged at a higher rate

3

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

Gains included in aggregate income of estate of deceased

4

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

Income to be disregarded in determining highest part of person’s income

5

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

SCHEDULE 36

Part 1 — Introduction

Introductory

1

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

Individuals qualifying for relief

2

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

Meaning of “foster care receipts”

3

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

Meaning of “provision of foster care”

4

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

Meaning of “total foster care receipts”

5

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

The individual’s limit

6

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

The individual’s share of the fixed amount

7

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

The amount per child

8

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

Power to alter amounts

9

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

Part 2 — The exemption and the alternative methods of calculation

The exemption

10

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

Alternative calculation of profits where amount is above the limit

11

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

Alternative calculation of profits: income from trade etc

12

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

Alternative calculation of profits: income charged under Case VI of Schedule D

13

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

Election for alternative method

14

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

Periods of account ending otherwise than on 5th April

15

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

Part 3 — Capital allowances

Introductory

16

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

Provisions applying in relation to carried forward unrelieved qualifying expenditure

17

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

Expenditure incurred in a relevant chargeable period not qualifying expenditure

18

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

Excluded capital expenditure: subsequent treatment of asset

19

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

Interpretation of this Part

20

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

Part 4 — Supplementary

Interpretation

21

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

SCHEDULE 37

Part 1 — Amendments to Schedule 9 to the Finance Act 1996

Introductory

1

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

Late interest

2

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

Continuity of treatment: groups etc

3

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

Discounted securities where companies have a connection

4

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

Discounted securities of close companies

5

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

Part 2 — Transitional provisions

Transitional provisions

6

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

SCHEDULE 38

Increase of repurchase price of UK securities by amount of deemed manufactured dividend

1

In section 737C of the Taxes Act 1988 (deemed manufactured payments)—

• (a) in subsection (3)(b) (repurchase price of UK equities to be treated as increased by gross amount of deemed manufactured dividend), omit “gross”, and

• (b) omit subsection (4) (definition of gross amount).

Deemed manufactured payment where transferor or connected person makes payment representative of dividend

2

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

3

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

Provisions to cover both “put” and “call” options

4

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

5

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

6

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

7

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

8

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

9

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

Option premium to be reflected in sale price unless brought into account under derivative contracts provisions

10

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

Exchange gains and losses

11

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

12

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

13

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

14

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

Exceptions

15

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

16

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

17

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

18

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

Connected persons

19

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

Correction of section 730A(6B) of the Taxes Act 1988

20

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

Commencement

21

• (1) Paragraph 1 has effect in relation to repurchase prices becoming due on or after 9th April 2003.

• (2) Paragraphs 2 to 19 have effect in relation to agreements to sell securities made on or after 9th April 2003.

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

SCHEDULE 39

Withdrawal of relief for incidental costs

1

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

Withdrawal of relief for losses

2

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

Withdrawal of loss relief: exception for strips of government securities

3

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

Extension of provisions about strips to strips of foreign government securities

4

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

Consequential amendments

5

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

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

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

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

Commencement and transitional provisions

6

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

SCHEDULE 40

Venture capital trusts

1

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

Stamp duty and stamp duty reserve tax

2

In section 66 of the Finance Act 1986 (c. 41) (stamp duty: company’s purchase of own shares)—

• (a) in subsection (2)—

• (i) for “The return which relates to the shares” substitute “ Any return which relates to any of the shares ”,

• (ii) after “169” insert “ (1) or (1B) ”, and

• (iii) after “transferring the shares” insert “ to which it relates ”,

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

• (c) in subsection (3), after “169” insert “ (1) or (1B) ”.

3

In section 90 of that Act (exemptions from stamp duty reserve tax), after subsection (7) insert—

(7A) Section 87 above does not apply as regards an agreement to transfer any shares in a company which are held by the company (whether in accordance with section 162A of the Companies Act 1985 (treasury shares) or otherwise).

.

4

• (1) Section 92 of that Act (stamp duty reserve tax: repayment or cancellation of tax) is amended as follows.

• (2) After subsection (1B) insert—

(1C) If, as regards an agreement to transfer shares in a company to that company (“the own-shares agreement”)— (a) tax is charged under section 87 above, and (b) it is proved to the Board’s satisfaction that at a time in the period of six years beginning on the relevant day (as defined in section 87(3)) the conditions mentioned in subsection (1D) have been fulfilled in respect of those shares, subsections (2) to (4A) apply. (1D) The conditions referred to in subsection (1C) are— (a) that, in relation to the transfer made in pursuance of the own-shares agreement, a return has been made in respect of each of those shares in accordance with section 169(1) or (1B) of the Companies Act 1985 (disclosure by company of purchase of own shares), and (b) that any such return has been duly stamped in accordance with section 66.

.

• (3) In subsection (2), after “subsection (1)” insert “ or, as the case may be, (1C) ”.

5

In Schedule 13 to the Finance Act 1999 (c. 16) (stamp duty: instruments chargeable and rates of duty), in Part 1 (conveyance or transfer on sale), in paragraph 1 (stamp duty charge), after sub-paragraph (2) insert—

(3) Sub-paragraph (1) is subject to sub-paragraphs (4) to (6). (4) Where a company acquires any shares in itself by virtue of section 162 of the Companies Act 1985 (power of company to purchase own shares) or otherwise, sub-paragraph (1) does not apply to any instrument by which the shares are transferred to the company. (5) Where a company holds any shares in itself by virtue of section 162A of that Act (treasury shares) or otherwise, any instrument to which sub-paragraph (6) applies is to be treated for the purposes of this Schedule as a conveyance otherwise than on sale, and paragraph 16 applies accordingly. (6) This sub-paragraph applies to any instrument for the sale or transfer of any of the shares by the company, other than an instrument which, in the absence of sub-paragraph (5), would be an instrument in relation to which— (a) section 67(2) of the Finance Act 1986 (transfer to person whose business is issuing depositary receipts etc), or (b) section 70(2) of that Act (transfer to person who provides clearance services etc), applied.

.

SCHEDULE 41

Accounting period for company in administration

1

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

Responsibility of officers of company in administration

2

• (1) Section 108 of the Taxes Management Act 1970 (c. 9) (responsibility of company officers) is amended as follows.

• (2) In subsection (3)(a)—

• (a) after first “liquidator” insert “ or administrator ”, and

• (b) after second “liquidator” insert “ or, as the case may be, administrator ”.

• (3) After subsection (3) insert—

(4) For the purposes of subsection (3)(a), where two or more persons are appointed to act jointly or concurrently as the administrator of a company, the proper officer is— (a) such one of them as is specified in a notice given to the Board by those persons for the purposes of this section, or (b) where the Board is not so notified, such one or more of those persons as the Board may designate as the proper officer for those purposes.

.

Tax on companies in administration

3

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

Debit for bad debt where parties connected and creditor insolvent

4

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

Commencement

5

• (1) Subject to sub-paragraph (2), this Schedule has effect in relation to companies which enter administration (whether under the Insolvency Act 1986 (c. 45) or otherwise) on or after the commencement of section 248 of the Enterprise Act 2002 (c. 40) (which substitutes Part 2 of the Insolvency Act 1986 (administration)).

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

SCHEDULE 42

Introductory

1

Part 2 of Schedule 25 to the Taxes Act 1988 (controlled foreign companies: exempt activities) is amended as follows.

Companies engaged in wholesale, distributive, financial or service business

2

• (1) Paragraph 6 (meaning of “engaged in exempt activities”) is amended as follows.

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

• (3) In sub-paragraph (2A) (persons from whom less than 50% of the gross trading receipts of a wholesale etc business of the controlled foreign company must be derived) omit the word “and” immediately preceding paragraph (c) and at the end of that paragraph add

; (d) persons not falling within paragraphs (a) to (c) above which are companies resident in the United Kingdom; (e) persons not falling within paragraphs (a) to (c) above which are companies not resident in the United Kingdom which carry on business through a branch or agency in the United Kingdom; (f) persons not falling within paragraphs (a) to (c) above who are individuals habitually resident in the United Kingdom; but where the company is a controlled foreign company falling within sub-paragraph (2B) below, paragraphs (d) to (f) above shall be disregarded.

.

• (4) After sub-paragraph (2A) insert—

(2B) A controlled foreign company falls within this sub-paragraph if either— (a) its main business is the effecting or carrying out of contracts of long-term insurance, other than protection business; or (b) it is a member of an insurance group and its main business is insuring or reinsuring large risks. Paragraph 11A below has effect for the interpretation of this sub-paragraph. (2C) For the purposes of sub-paragraph (2)(b) above, a company’s gross trading receipts from a business shall be regarded as directly or indirectly derived from a person falling within sub-paragraph (2A)(e) above only to the extent that they are derived directly or indirectly from contracts or other arrangements relating to that person’s branch or agency in the United Kingdom.

.

• (5) In sub-paragraph (4C) (which defines for the purposes of sub-paragraph (2)(b) a “25 per cent assessable interest”, an expression not used in sub-paragraph (2)(b) but used in sub-paragraph (2A)(b)) for “(2)(b)” substitute “ (2A)(b) ”.

Companies engaged in business of banking etc

3

• (1) Paragraph 11 (provisions relating to wholesale, distributive, financial or service business) is amended as follows.

• (2) In sub-paragraph (3) (controlled foreign company engaged in business of banking etc) for paragraph (a) (interest from UK company not to be regarded as receipt derived from connected or associated persons) substitute—

(a) no payment of interest received from a company resident in the United Kingdom which is connected or associated with the controlled foreign company shall be regarded for the purposes of paragraph 6(2)(b) above as a receipt derived directly or indirectly from a person falling within paragraph 6(2A) above, but

.

• (3) At the end of paragraph (b) of that sub-paragraph (the capitalisation test) add

, and (c) it shall also be conclusively presumed that the condition in paragraph 6(2)(b) is not fulfilled if 10% or more of the company’s gross trading receipts from all businesses carried on by it in the accounting period in question, taken together, are receipts other than interest and are directly or indirectly derived from persons— (i) which are companies resident in the United Kingdom, (ii) which are companies not resident in the United Kingdom but which carry on business through a branch or agency in the United Kingdom, or (iii) who are individuals habitually resident in the United Kingdom, but for this purpose a company’s gross trading receipts shall be regarded as directly or indirectly derived from a person falling within sub-paragraph (ii) above only to the extent that they are derived directly or indirectly from contracts or other arrangements relating to that person’s branch or agency in the United Kingdom.

.

Interpretation of paragraph 6(2B)

4

After paragraph 11 insert—

(11A) (1) This paragraph has effect for the interpretation of paragraph 6(2B) above. (2) “Contract of long-term insurance” means any contract falling within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. (3) “Protection business” means contracts of long-term insurance where— (a) either— (i) the contract has no surrender value; or (ii) the consideration consists of a single premium and the surrender value does not exceed the amount of that premium; and (b) the contract makes no provision for its conversion or extension in a manner which would result in its ceasing to fall within paragraph (a) above; and references to protection business include a reference to reinsurance of protection business. (4) “Insurance group” shall be construed in accordance with section 255A(5) of the Companies Act 1985 (meaning of “insurance group” in Part 7) but reading Part 7 of that Act— (a) as if it extended to Northern Ireland, and (b) as if any reference to a company (within the meaning of that Act) included a reference to a company as defined in Article 3 of the Companies (Northern Ireland) Order 1986, but does not include such an insurance group if it falls within sub-paragraph (5) below. (5) Such an insurance group falls within this sub-paragraph if (within the meaning of that Part as so read) the parent company is a subsidiary undertaking of a parent company which is neither— (a) the parent company of an insurance group; nor (b) a subsidiary undertaking of the parent company of an insurance group. (6) A controlled foreign company is, in accordance with sub-paragraphs (4) and (5) above, a “member of an insurance group” if (within the meaning of that Part as so read) it is the parent company, or a subsidiary undertaking of the parent company, of an insurance group which is by virtue of sub-paragraph (4) above an insurance group for the purposes of paragraph 6(2B) above. (7) A company’s main business is “insuring or reinsuring large risks” if (and only if)— (a) the company’s main business is the effecting or carrying out of contracts of insurance; and (b) 50% or more of its gross trading receipts from that business are derived from insuring or reinsuring large risks. - “Large risks” is defined in paragraph 11B below. (8) In this paragraph— - “contract of insurance” has the meaning given by article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; - “contract of long-term insurance” has the meaning given by sub-paragraph (2) above. (11B) (1) In paragraph 11A above “large risks” means— (a) risks falling within classes 4, 5, 6, 7, 11 and 12 of Part I of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; (b) risks falling within classes 14 and 15 of that Part which relate to a business carried on by the policy holder; (c) risks falling within classes 3, 8, 9, 10, 13 and 16 of that Part where the policy holder carries on a business in respect of which the condition specified in sub-paragraph (2) below is satisfied. (2) The condition referred to in sub-paragraph (1)(c) above is that, in the case of that business of the policy holder, at least two of the three following criteria were exceeded in the most recent financial year beginning on or after 1st January 1999 for which the information is available— (a) balance sheet total: 6.2 million euros; (b) net turnover: 12.8 million euros; (c) number of employees: 250. (3) For the purposes of sub-paragraph (2) above as it applies where the policy holder is a company, within the meaning of section 735(1) of the Companies Act 1985 or Article 3 of the Companies (Northern Ireland) Order 1986,— (a) “balance sheet total” has the meaning given by section 247(5) of that Act or Article 255(5) of that Order; (b) “net turnover” has the meaning given to “turnover” by section 262(1) of that Act or Article 270(1) of that Order; and (c) “number of employees” has the meaning given by section 247(6) of that Act or Article 255(6) of that Order; and for a financial year which is a company’s financial year but not in fact a year, the net turnover of the company shall be proportionately reduced. (4) Where the policy holder is a member of a group for which consolidated accounts (within the meaning of Directive 83/349/EEC) are drawn up, the question whether the condition in sub-paragraph (2) above is met shall be determined by reference to those accounts. (5) For the purposes of sub-paragraph (1)(c) above as it applies where the policy holder is a professional association, joint venture or temporary grouping, the question whether the condition in sub-paragraph (2) above is met shall be determined by reference to the aggregate of the figures of the description in question for all the members of the professional association, joint venture or temporary grouping. (6) In sub-paragraphs (1) to (5) above “business” includes a trade or profession and, for the purposes of sub-paragraph (1)(c) above, any activity of a professional association, joint venture or temporary grouping. (7) For the purposes of this paragraph, where an amount is denominated in any accounts in a currency other than the euro, it shall be converted into its equivalent in euros using the London closing exchange rate for that currency and the euro for the last day of the period to which the accounts relate. (8) In this paragraph— - “euro” means the single currency adopted or proposed to be adopted as its currency by a member State in accordance with the Treaty establishing the European Community; - “financial year”, in relation to any person, means the period (not exceeding 12 months) for which that person makes up accounts.

.

SCHEDULE 43

Part 1 — Excise duties

Part 2 — Value added tax

Part 3 — Income tax, corporation tax and capital gains tax

Part 4 — Other taxes

Part 5 — Miscellaneous

Rates of tobacco products duty

Rate of duty on beer

Rates of duty on wine and made-wine

Rates of hydrocarbon oil duties

Rebates on hydrocarbon oil duties

General betting duty and pool betting duty: relief for losses

General betting duty: betting exchanges

General betting duty: restriction of exemption for on-course bets

Bingo duty

Amusement machines not operated by coins or tokens

Amusement machines: use of currencies other than sterling

Responsibility for unlicensed amusement machines

Rates of gaming duty

Vehicle excise duty: rates

Disclosure for exemptions: Northern Ireland

Duty at higher rate: exception for tractive units

Requirement of evidence or security

Joint and several liability for unpaid VAT of another trader

Review by HMRC

Contract providing for conveyance to third party

Contract providing for conveyance to third party

Penalty for contravention of relevant rule

Nature of review etc

Contract and conveyance

Chargeable interests

Compliance with planning obligations

Compliance with planning obligations

Initial transfer of assets to trustees of unit trust scheme

Acquisitions by certain health service bodies

Alternative property finance in Scotland: land sold to financial institution and leased to person

Alternative property finance in Scotland: land sold to financial institution and person in common

Crofting community right to buy

Interest on penalties

Interest on unpaid tax

Interest on penalties

Orders and regulations made by the Treasury or the Inland Revenue

Orders and regulations made by the Treasury or the Inland Revenue

Meaning of “market value”

Further provisions relating to leases

Abolition of stamp duty except on instruments relating to stock or marketable securities

Abolition of stamp duty except on instruments relating to stock or marketable securities

Exemption of certain leases granted by registered social landlords

Employee securities and options

Restriction of deductions for employee benefit contributions

PAYE: regulations and notional payments

PAYE on notional payments: reimbursement period

Taxable benefits: lower threshold for cars with a CO2 emissions figure

Restriction of deductions for employee benefit contributions

Double taxation relief: profits attributable to overseas permanent establishment

Double taxation relief: profits attributable to overseas permanent establishment

Deferred unascertainable consideration: election for treatment of loss

Avoidance affecting proceeds of balancing event

Expenditure on software for sub-licensing

Expenditure on software for sub-licensing

Extension of first-year allowances for ICT expenditure by small enterprises

Deferred unascertainable consideration: election for treatment of loss

Derivative contracts: transactions within groups

Rate of landfill tax

Deemed supplies

Gains on policies of life insurance etc: rate of tax

Deemed supplies

Amendments about registration, payment etc

Gifts with reservation

Foster carers

Authorised unit trusts, OEICs and common investment funds

Higher rate of tax: divided companies

Electricity from renewable sources etc

Companies in administration

Gifts with reservation

Mandatory electronic payment

Mandatory electronic payment

Accounts of Consolidated Fund and National Loans Fund

Payments in error from or to National Loans Fund

Deemed supplies

Acquisition by property trader from individual acquiring new dwelling

Accounts of Consolidated Fund and National Loans Fund

Companies in administration

Election by property-investment partnership to disapply paragraph 10

Transfer of chargeable interest to a partnership: chargeable consideration including rent

Transfer of chargeable interest from a partnership: general

Introduction

Transfer of chargeable interest to a partnership: chargeable consideration including rent

Transfer of chargeable interest to a partnership: sum of the lower proportions

Transfer of chargeable interest from a partnership: chargeable consideration including rent

Transfer of chargeable interest from a partnership: chargeable consideration including rent

Transfer of partnership interest pursuant to earlier arrangements

Partnership interests: application of provisions about exchanges etc.

Application of exemptions and reliefs

Introductory

Insertion of new section 3A

Persons registered under Schedule 1

The special accounting scheme

No chargeable consideration

Grant of certain leases by registered social landlords

Transactions in connection with divorce etc

Variation of testamentary dispositions etc

Power to add further exemptions

Money or money’s worth

Value added tax

Postponed consideration

Just and reasonable apportionment

Exchanges

Partition etc: disregard of existing interest

Valuation of non-monetary consideration

Debt as consideration

Conversion of amounts in foreign currency

Carrying out of works

Provision of services

Land transaction entered into by reason of employment

Obligations under lease

Surrender of existing lease in return for new lease

Reverse premium

Indemnity given by purchaser

Introduction

Calculation of tax chargeable in respect of rent

Net present value of rent payable over term of lease

Rent payable

Effect of provision for rent review

Term of lease

Treatment of lease for indefinite term

Temporal discount rate

Tax chargeable in respect of consideration other than rent : general

Increase of rent treated as grant of new lease

Interpretation

Meaning of “disadvantaged area”

Continuation of regulations made for purposes of stamp duty

Introduction

Land all non-residential

Land all residential

Land partly non-residential and partly residential

Introduction

Land all non-residential

Land all residential

Land partly non-residential and partly residential

Relevant consideration and relevant rental value

Rent and annual rent

Group relief

Restrictions on availability of group relief

Withdrawal of group relief

Cases in which group relief not withdrawn

Recovery of group relief from another group company or controlling director

Recovery of group relief: supplementary

Reconstruction relief

Acquisition relief

Withdrawal of reconstruction or acquisition relief

Cases in which reconstruction or acquisition relief not withdrawn

Withdrawal of reconstruction or acquisition relief on subsequent non-exempt transfer

Recovery of reconstruction or acquisition relief from another group company or controlling director

Recovery of reconstruction or acquisition relief: supplementary

Charities relief

Withdrawal of charities relief

Right to buy transactions

Shared ownership lease: election for market value treatment

Transfer of reversion under shared ownership lease where election made for market value treatment

Shared ownership lease: election where staircasing allowed

Shared ownership leases: meaning of “qualifying body” and “preserved right to buy”

Rent to mortgage or rent to loan: chargeable consideration

Contents of return

Meaning of filing date and delivery of return

Failure to deliver return: flat-rate penalty

Failure to deliver return: tax-related penalty

Formal notice to deliver return: daily penalty

Amendment of return by purchaser

Correction of return by Revenue

Penalty for incorrect or uncorrected return

Duty to keep and preserve records

Preservation of information etc

Penalty for failure to keep and preserve records

Notice of enquiry

Scope of enquiry

Notice to produce documents etc for purposes of enquiry

Appeal against notice to produce documents etc

Penalty for failure to produce documents etc

Amendment of self-assessment during enquiry to prevent loss of tax

Amendment of return by taxpayer during enquiry

Referral of questions to the tribunal during enquiry

Withdrawal of notice of referral

Effect of referral on enquiry

Effect of determination

Completion of enquiry

Direction to complete enquiry

Determination of tax chargeable if no return delivered

Determination to have effect as a self-assessment

Determination superseded by actual self-assessment

Assessment where loss of tax discovered

Assessment to recover excessive repayment of tax

Restrictions on assessment where return delivered

Time limit for assessment

Assessment procedure

Relief in case of double assessment

Claim for relief for overpaid tax etc

Right of appeal

Notice of appeal