Finance Act 1980

Section 59(2).

SCHEDULE 11 Trustee Savings Banks

Taxation under Case I of Schedule D

1 (1) In section 304(5) of the Taxes Act (meaning of investment company) for the words “but includes any savings bank or other bank for savings ” there shall be substituted the words “but (with the exception of a trustee savings bank as defined in section 95(1) of the Trustee Savings Banks Act 1969) includes any savings bank or other bank for savings ”.

(2) This paragraph applies in relation to any accounting period beginning on or after 21st November 1979 (in this Schedule referred to as “the commencement date ”).

Investments held on list November 1979

2 (1) A trustee savings bank shall be treated as having on the commencement date appropriated as trading stock for the purposes of its trade all investments then held by it which are such that a profit on their sale on or after that date would form part of the trading profits of the bank.

(2) Any gain or loss accruing to a trustee savings bank on the redemption before 21st November 1986 of an exempt investment held by it on the commencement date shall be left out of account in computing its profits, gains or losses under Case I of Schedule D.

(3) Any gain or loss accruing to a trustee savings bank on a disposal of an exempt investment held by it on the commencement date, not being a gain or loss left out of account under sub-paragraph (2) above, may, if the bank so elects, be computed by reference to the cost of the investment instead of by reference to its market value on that date and, in the case of a loss, without any restriction under section 270(4) of the Taxes Act.

(4) Any election under sub-paragraph (3) above shall be by notice in writing given to the Board within two years after the commencement date and shall have effect in relation to all exempt investments held by the bank on that date.

(5) Where a trustee savings bank holds investments which include both exempt investments held by it on the commencement date and other investments of the same class, any investments of that class which are disposed of by the bank shall be treated for the purposes of sub-paragraph (3) above as consisting of the other investments rather than of the exempt investments held on that date.

(6) In this paragraph references to exempt investments held by a trustee savings bank on the commencement date are to investments on the disposal of which immediately before that date no chargeable gain or allowable loss would have accrued to the bank by virtue of section 67 of the [1979 c. 14.] Capital Gains Tax Act 1979 (gilt-edged securities held for more than a year).

Restriction of allowable deductions

3 (1) Where for any accounting period of a trustee savings bank which begins on or after the commencement date the bank is exempted from tax in respect of any amount of interest by virtue of section 339(1) of the Taxes Act (exemption for trustee savings bank's income from investments with National Debt Commissioners) the bank's allowable deductions for that period shall be treated for tax purposes as reduced by an amount calculated in accordance with sub-paragraph (2) below.

(2) The amount referred to above shall be calculated by—

(a) multiplying the bank's allowable deductions for the period by a fraction of which the numerator is the gross amount of exempt interest received by the bank in the period and the denominator is the aggregate of the gross amount of interest received by the bank in the period and of the bank's income in the period from dividends and other distributions ; and

(b) subtracting from the result an amount equal to 15 per cent, of the gross amount of exempt interest received by the bank in the period.

(3) In this paragraph “allowable deductions” means the deductions which, apart from this paragraph, would be taken into account for the purpose of computing the bank's profits, gains or losses under Case I of Schedule D for the period in question but excluding any deduction in respect of a loss on the disposal of an investment.

(4) For the purposes of this paragraph interest on loans made by a trustee savings bank to any of its depositors or customers shall be treated as received by the bank when it is brought to credit by the bank.

Restriction of charges on income

4 Where for any accounting period of a trustee savings bank which begins on or after the commencement date the bank is exempted from tax in respect of any amount of interest by virtue of section 339(1) of the Taxes Act, the charges on income allowed as a deduction from the bank's profits for that period under section 248 of the Taxes Act shall be treated for tax purposes as reduced by an amount calculated by multiplying them by the fraction referred to in paragraph 3(2)(a) above.

Income applied in paying interest to depositors

5 (1) In section 339(2) of the Taxes Act (savings bank, including trustee savings bank, entitled to exemption from tax in respect of income applied in paying interest to depositors) for the word “including ” there shall be substituted the word “excluding ”.

(2) This paragraph applies in relation to any accounting period beginning, in the case of a trustee savings bank resident in the United Kingdom, on or after the commencement date and, in the case of a trustee savings bank not so resident, on or after 21st November 1983.

Mergers

6 (1) Where the business of a trustee savings bank is transferred to another trustee savings bank after the commencement date, those banks shall be treated for the purposes of the Taxes Act as if they were the same person.

(2) Where the business of a trustee savings bank is transferred to another trustee savings bank after the commencement date—

(a) any exempt investment which was held on that date by the first bank and was transferred with the business shall be treated for the purposes of sub-paragraphs (2) to (5) of paragraph 2 above as if it had been held on that date by the second bank but without prejudice to any election already made in respect of the investment by the first bank under sub-paragraph (3) of that paragraph ; and

(b) the cost of the investment shall be taken for the purposes of the said sub-paragraph (3) as equal to the cost of the investment to the first bank.

(3) Where the business of a trustee savings bank was transferred to another trustee savings bank before the commencement date the cost of any exempt investment held by the second bank on that date which—

(a) was transferred to it with the business ; and

(b) was an exempt investment on the date of transfer,

shall be taken for the purposes of sub-paragraph (3) of paragraph 2 above as equal to the cost of the investment to the first bank.

(4) Sub-paragraph (6) of paragraph 2 above shall apply to subparagraphs (2) and (3) above as it applies to that paragraph and shall so apply as if the references in it to the commencement date and section 67 of the Act of 1979 included references to the date of transfer in sub-paragraph (3)(b) above and section 41 of the [1969 c. 32.] Finance Act 1969 respectively.

Accounting periods

7 An accounting period of a trustee savings bank shall end immediately before the commencement date if, apart from this paragraph, it would not have done so.

Interpretation

8 In this Schedule—

• “the commencement date” has the meaning given in paragraph 1(2) above;

• “trustee savings bank” has the same meaning as in the [1969 c. 50.] Trustee Savings Banks Act 1969.