Finance Act 1989

Part II U.K. Income Tax, Corporation Tax and Capital Gains Tax

CHAPTER I U.K. General

Income tax rates and allowances U.K.

30 Charge and rates of income tax for 1989-90. U.K.

(1) Income tax shall be charged for the year 1989-90, and the basic rate of tax shall be 25 per cent.

(2) The higher rate at which income tax is charged for the year 1989-90 in respect of so much of an individual’s total income as exceeds the basic rate limit (20,700) shall be 40 per cent.

Modifications etc. (not altering text)

C1 For earlier years see Table C, Vol. 1

31 Age allowance. U.K.

(1) In section 257 of the Taxes Act 1988—

(a) in subsection (3) (increased allowance for those aged 80 and over) for “80”, wherever occurring, there shall be substituted “75”, and

(b) in subsection (5) (age allowance withdrawn by two-thirds of amount by which income exceeds a specified limit) for “two-thirds” there shall be substituted “one half”.

(2) This section shall have effect for the year 1989-90.

Modifications etc. (not altering text)

C2 For earlier years see Table E(1), Vol. 1

32 Operative date for PAYE. U.K.

For the year 1989-90, sections 1(5) and 257(10) of the Taxes Act 1988(which specify the date from which indexed changes in the basic rate limit and in allowances are to be brought into account for the purposes of PAYE) shall have effect as if for the reference to 5th May there were substituted a reference to 18th May.

33 Married couples. U.K.

(1) Sections 257 to 257F and 265 of the M1 Taxes Act 1988,as inserted for the year 1990-91 and subsequent years by the Finance Act 1988,shall be amended as follows.

(2) In section 257(1) for “£2,605” there shall be substituted “£2,785”.

(3) In section 257(2) for “£3,180” there shall be substituted “£3,400”.

(4) In section 257(3)—

(a) for “80” there shall be substituted “75”, and

(b) for “£3,310” there shall be substituted “£3,540”.

(5) In section 257(5)—

(a) for “£10,600” there shall be substituted “£11,400”,and

(b) for “two-thirds” there shall be substituted “one half”.

[F1 (6) In section 257A(1) for “£1,490” there shall be substituted “£1,590”.]

(7) In section 257A(2) for “£1,855” there shall be substituted “£1,985”.

(8) In section 257A(3)—

(a) for “80” there shall be substituted “75”, and

(b) for “£1,895” there shall be substituted “£2,025”.

(9) In section 257A(5)—

(a) for “£10,600” there shall be substituted “£11,400”,and

(b) for “two-thirds” there shall be substituted “one half”.

(10) In sections F2 . . . [F3 257D(8) and] 265(3) after paragraph (b) there shall be inserted “or

(c) on account of any payments to which section 593(2) or 639(3) applies,”.

[F4 (11) In section 257E(1)(b) for “80” there shall be substituted “75”.

F4 (12) In section 257E(2)(a) for “£3,180” there shall be substituted “£3,400”.

F4 (13) In section 257E(2)(b) for “£3,310” there shall be substituted “£3,540”.]

Textual Amendments

F1 S. 33(6) repealed (27.7.1999 with effect for the year 2000-2001 and subsequent years of assessment) by 1999 c. 16, s. 139, Sch. 20 Pt. III(3), note 2

F2 Words in s. 33(10) repealed (16.7.1992) by virtue of Finance (No. 2) Act 1992 (c. 48), ss. 20, 82, Sch. 5 para. 10, Sch. 18 Pt. VII(1)

F3 Words in s. 33(10) repealed (27.7.1999 with effect for the year 2000-2001 and subsequent years of assessment) by virtue of 1999 c. 16, s. 139, Sch. 20 Pt. III(3), note 2

F4 S. 33(11)-(13) repealed (27.7.1999 with effect for the year 2000-2001 and subsequent years of assessment) by 1999 c. 16, s. 139, Sch. 20 Pt. III(3), note 2

Modifications etc. (not altering text)

C3 See Income and Corporation Taxes Act 1988 (c. 1,SIF 63:1), s. 257for 1989–1990and see Income andCorpartion Taxes Act 1988 (c. 1, SIF 63:1), 257–257Ffor1990–1991

Marginal Citations

M1 1988 c. 39.

Corporation tax rates etc. U.K.

34 Charge and rate of corporation tax for financial year 1989. U.K.

Corporation tax shall be charged for the financial year 1989 at the rate of 35 per cent.

Modifications etc. (not altering text)

C4 For earlier years see Table K, Vol. 1

35 Corporation tax: small companies. U.K.

(1) For the financial year 1989—

(a) the small companies’ rate shall be 25 per cent., and

(b) the fraction mentioned in section 13(2) of the Taxes Act 1988 (marginal relief for small companies) shall be one fortieth.

(2) In section 13(3) of that Act (limits of marginal relief), in paragraphs (a) and (b)—

(a) for “£100,000” there shall be substituted “£150,000”, and

(b) for “£500,000” there shall be substituted “£750,000”.

(3) Subsection (2) above shall have effect for the financial year 1989 and subsequent financial years; and where by virtue of that subsection section 13of the Taxes Act 1988 has effect with different relevant maximum amounts in relation to different parts of a company’s accounting period, then for the purposes of that section those parts shall be treated as if they were separate accounting periods and the profits and basic profits of the company for that period shall be apportioned between those parts.

Modifications etc. (not altering text)

C5 For earlier years see Table K, Vol. 1

C6 For earlier years see Table L, Vol. 1

Receipts basis etc. U.K.

F5 36 Schedule E: revised Cases. U.K.

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Textual Amendments

F5 Ss. 36-42 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F5 37 Schedule E: assessment on receipts basis. U.K.

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Textual Amendments

F5 Ss. 36-42 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F5 38 Schedule E: unpaid emoluments. U.K.

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Textual Amendments

F5 Ss. 36-42 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F5 39 Schedule E: unremitted emoluments. U.K.

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Textual Amendments

F5 Ss. 36-42 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F5 40 Schedule E: emoluments already paid. U.K.

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Textual Amendments

F5 Ss. 36-42 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F5 41 Schedule E: pensions etc. U.K.

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Textual Amendments

F5 Ss. 36-42 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

Modifications etc. (not altering text)

C7 S. 41 extended (3.5.1994) by 1994 c. 9, s. 139(3)

F5 42 Schedule E: supplementary. U.K.

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Textual Amendments

F5 Ss. 36-42 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

[F6 43 Schedule D: computation U.K.

(1) In calculating [F7 profits or gains to be charged under Schedule D] for a period of account, no deduction is allowed for an amount charged in the accounts in respect of employees' remuneration, unless the remuneration is paid before the end of the period of 9 months immediately following the end of the period of account.

(2) For the purposes of subsection (1) above an amount charged in the accounts in respect of employees' remuneration includes an amount [F8 for which provision is made in the accounts] with a view to its becoming employees' remuneration.

(3) Subsection (1) above applies whether the amount is in respect of particular employments or in respect of employments generally.

(4) If the remuneration is paid after the end of the period of 9 months mentioned in subsection (1) above, any deduction allowed in respect of it is allowed for the period of account in which it is paid and not for any other period of account.

(5) If the profits F9 ... are calculated before the end of the period of 9 months mentioned in subsection (1) above—

(a) it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but

(b) if the remuneration is subsequently paid before the end of that period, the calculation is adjusted if a claim to adjust it is made to an officer of the Board within 2 years beginning with the end of the period of account.

(6) For the purposes of this section, remuneration is paid when it—

(a) is treated as received by an employee for the purposes of the Income Tax (Earnings and Pensions) Act 2003 by section 18, 19, 31 or 32 of that Act (receipt of money and non-money earnings), or

(b) would be so treated if it were not exempt income.

(7) In this section—

• “employee” includes an office-holder and “employment” correspondingly includes an office, and

• “remuneration” means an amount which is or is treated as earnings for the purposes of the Income Tax (Earnings and Pensions) Act 2003.]

Textual Amendments

F6 S. 43 substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 157 (with Sch. 7)

F7 Words in s. 43(1) substituted (with effect in accordance with Sch. 17 para. 4(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 17 para. 4(1)(a)

F8 Words in s. 43(2) substituted for s. 43(2)(a)(b) (with effect in accordance with Sch. 24 para. 11 of the amending Act) by Finance Act 2003 (c. 14), Sch. 24 para. 10(1)

F9 Words in s. 43(5) omitted (with effect in accordance with Sch. 17 para. 4(2) of the amending Act) by virtue of Finance Act 2004 (c. 12), Sch. 17 para. 4(1)(b)

[F10 44 [F11 Companies with investment business and insurance companies: computation] U.K.

[F12 (1) For the purposes of corporation tax, in calculating for a period of account the profits of a company with investment business, an amount charged in the accounts in respect of employees' remuneration shall not be deductible under section 75 of the Taxes Act 1988 as expenses of management unless the remuneration is paid before the end of the period of 9 months immediately following the end of the period of account.]

(2) For the purposes of subsection (1) above an amount charged in the accounts in respect of employees' remuneration includes an amount [F13 for which provision is made in the accounts] with a view to its becoming employees' remuneration.

(3) Subsection (1) above applies whether the amount is in respect of particular employments or in respect of employments generally.

(4) If the remuneration is paid after the end of the period of 9 months mentioned in subsection (1) above, any deduction allowed in respect of it is allowed for the period of account in which it is paid and not for any other period of account.

(5) If [F14 the profits of the company] are calculated before the end of the period of 9 months mentioned in subsection (1) above—

(a) it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but

(b) if the remuneration is subsequently paid before the end of that period, the calculation is adjusted if a claim to adjust it is made to an officer of the Board by or on behalf of the company within 2 years beginning with the end of the period of account.

(6) For the purposes of this section, remuneration is paid when it—

(a) is treated as received by an employee for the purposes of the Income Tax (Earnings and Pensions) Act 2003 by section 18, 19, 31 or 32 of that Act (receipt of money and non-money earnings), or

(b) would be so treated if it were not exempt income.

[F15 (7) This section shall apply in calculating the profits of a company in relation to which section 76 of the Taxes Act 1988 applies (companies carrying on life assurance business) as it applies in calculating the profits of a company with investment business; and in any such case—

(a) any reference in this section to an amount being deductible under section 75 of the Taxes Act 1988 as expenses of management shall be taken as a reference to an amount being brought into account under section 76 of that Act as expenses payable and references to a deduction shall be construed accordingly;

(b) subsection (4) above shall have effect subject to section 86 below, and

(c) in construing section 86 below the remuneration shall be treated as expenses payable for that period which fall to be included at Step 1 in section 76(7) of the Taxes Act 1988.]

(8) In this section—

• [F16 “company with investment business” has the same meaning as in Part 4 of the Taxes Act 1988 (see section 130 of that Act),]

• “employee” includes an office-holder and “employment” correspondingly includes an office,

• F17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “remuneration” means an amount which is or is treated as earnings for the purposes of Parts 2 to 7 of the Income Tax (Earnings and Pensions) Act 2003.]

Textual Amendments

F10 S. 44 substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 158 (with Sch. 7)

F11 S. 44 heading substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 42(6)

F12 S. 44(1) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 42(2)

F13 Words in s. 44(2) substituted for s. 44(2)(a)(b) (with effect in accordance with Sch. 24 para. 11 of the amending Act) by Finance Act 2003 (c. 14), Sch. 24 para. 10(1)

F14 Words in s. 44(5) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 42(3)

F15 S. 44(7) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 42(4)

F16 Words in s. 44(8) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections. 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 42(5)(a)

F17 Words in s. 44(8) omitted (with effect in accordance with art. 1(2) of the amending S.I.) by virtue of The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 42(5)(b)

F18 45 PAYE: meaning of payment. U.K.

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Textual Amendments

F18 S. 45 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

Interest U.K.

46 Relief for interest. U.K.

For the year 1989-90 the qualifying maximum defined in section 367(5) of the Taxes Act 1988 (limit on relief for interest on certain loans) shall be£30,000.

47 Close company loans: business expansion scheme. U.K.

In section 360 of the Taxes Act 1988 (loans to buy interest in close company), after subsection (3) there shall be inserted—

“(3A) Interest shall not be eligible for relief under section 353 by virtue of paragraph (a) of subsection (1) above in respect of shares acquired on or after 14th March 1989 if at any time the person by whom they are acquired, or that person’s husband or wife, makes a claim for relief in respect of the munder Chapter III of Part VII.”

48 Close company loans: material interest. U.K.

(1) In section 360 of the Taxes Act 1988 for subsection (4) there shall be substituted—

“(4) Subject to section 360A, in this section expressions to which a meaning is assigned by Part XI have that meaning.”

(2) The following section shall be inserted after that section—

“360A Meaning of “material interest” in section 360.

(1) For the purposes of section 360(2)(a) an individual shall be treated as having a material interest in a company—

(a) if he, either on his own or with one or more of his associates, or if any associate of his with or without other such associates, is the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 5 per cent. of the ordinary share capital of the company, or

(b) if, on an amount equal to the whole distributable income of the company falling to be apportioned under Part XI for the purpose of computing total income, more than 5 per cent. of that amount could be apportioned to him together with his associates (if any), or to any associate of his, or any such associates taken together.

(2) Subject to the following provisions of this section, in subsection (1)above “associate”, in relation to an individual, means—

(a) any relative or partner of the individual;

(b) the trustee or trustees of a settlement in relation to which the individual is, or any relative of his (living or dead) is or was, a settlor(“settlement” and “settlor” having the same meaning as in section 681(4)); and

(c) where the individual is interested in any shares or obligations of the company which are subject to any trust, or are part of the estate of a deceased person, the trustee or trustees of the settlement concerned or, as the case may be, the personal representative of the deceased.

(3) In relation to any loan made after 5th April 1987, there shall be disregarded for the purposes of subsection (2)(c) above—

(a) the interest of the trustees of an approved profit sharing scheme (within the meaning of section 187) in any shares which are held by them in accordance with the scheme and have not yet been appropriated to an individual; and

(b) any rights exercisable by those trustees by virtue of that interest.

(4) In relation to any loan made on or after the day on which the Finance Act1989 was passed, where the individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees shall not be regarded as associates of his by reason only of that interest unless subsection (6) below applies in relation to him.

(5) In subsection (4) above “employee benefit trust” has the same meaning as in paragraph 7 of Schedule 8, except that in its application for this purpose paragraph 7(5)(b) shall have effect as if it referred to the day on which the Finance Act 1989 was passed instead of to 14th March 1989.

(6) This subsection applies in relation to an individual if at any time on or after the day on which the Finance Act 1989 was passed—

(a) the individual, either on his own or with any one or more of his associates, or

(b) any associate of his, with or without other such associates,

has been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 5 percent. of the ordinary share capital of the company.

(7) Sub-paragraphs (9) to (12) of paragraph 7 of Schedule 8 shall apply for the purposes of subsection (6) above in relation to an individual as they apply for the purposes of that paragraph in relation to an employee.

(8) In relation to any loan made before 14th November 1986, where the individual is interested in any shares or obligations of the company which are subject to any trust, or are part of the estate of a deceased person, subsection (2)(c) above shall have effect as if for the reference to the trustee or trustees of the settlement concerned or, as the case may be, the personal representative of the deceased there were substituted a reference to any person (other than the individual) interested in the settlement or estate, but subject to subsection (9) below.

(9) Subsection (8) above shall not apply so as to make an individual an associate as being entitled or eligible to benefit under a trust—

(a) if the trust relates exclusively to an exempt approved scheme as defined in section 592; or

(b) if the trust is exclusively for the benefit of the employees, or the employees and directors, of the company or their dependants (and not wholly or mainly for the benefit of directors or their relatives), and the individual in question is not (and could not as a result of the operation of the trust become), either on his own or with his relatives, the beneficial owner of more than 5 per cent. of the ordinary share capital of the company;

and in applying paragraph (b) above any charitable trusts which may arise on the failure or determination of other trusts shall be disregarded.

(10) In this section “relative” means husband or wife, parent or remoter forebear, child or remoter issue or brother or sister.”

Benefits in kind U.K.

49 Car benefits. U.K.

(1) In Schedule 6 to the Taxes Act 1988 (taxation of directors and others in respect of cars) for Part I (tables of flat rate cash equivalents) there shall be substituted—

“Part I U.K. Tables of Flat Rate Cash Equivalents

table A

cars with an original market value up to £19,250 and having a cylinder capacity

Cylinder capacity of car in cubic centimetres	Age of car at end of relevant year of assessment
	Under 4 years	4 years or more
1400 or less	£1,400	£950
More than 1400 but not more than 2000	£1,850	£1,250
More than 2000	£2,950	£1,950

table B

Cars with an original market value up to £19,250 and not having a cylinder capacity

Original market value of car	Age of car at end of relevant year of assessment
	Under 4 years	4 years or more
Less than £6,000	£1,400	£950
£6,000 or more but less than £8,500	£1,850	£1,250
£8,500 or more but not more than £19,250	£2,950	£1,950

table B

Cars with an original market value of more than £19,250

Original market value of car	Age of car at end of relevant year of assessment
	Under 4 years	4 years or more
More than £19,250 but not more than £29,000	£3,850	£2,600
More than £29,000	£6,150	£4,100”

(2) This section shall have effect for the year 1989-90 and subsequent years of assessment.

F19 50 Security assets and services. U.K.

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Textual Amendments

F19 Ss. 50-52 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F19 51 Assets used partly for security. U.K.

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Textual Amendments

F19 Ss. 50-52 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F19 52 Security: supplementary. U.K.

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Textual Amendments

F19 Ss. 50-52 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

53 Employees earning £8,500 or more and directors. U.K.

F20 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F20 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F20 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F20 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F20 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F20 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F20 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f) the words “ employment to which Chapter II of Part V applies ”shall be substituted for the words from “director’s” to “section167)” in [F21 section 418(3)(a)] of that Act;

F20 (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F20 S. 53 repealed (except s. 53(2)(f) so far as relating to s. 418(3) of ICTA) (6.4.2003) (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F21 Words in s. 53(2)(f) substituted (6.4.2003) (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 159 (with Sch. 7)

Medical insurance U.K.

[F22 54 Relief. U.K.

(1) This section applies where—

(a) on or after 6th April 1990 an individual makes a payment in respect of a premium under a contract of private medical insurance (whenever issued),

(b) the contract meets the requirement in subsection (2) below as to the person or persons insured,

(c) at the time the payment is made the contract is an eligible contract,

(d) the individual making the payment does not make it out of resources provided by another person for the purpose of enabling it to be made, and

(e) the individual making the payment is not entitled to claim any relief or deduction in respect of it under any other provision of the Tax Acts.

(2) The requirement mentioned in subsection (1)(b) above is that the contract insures—

(a) an individual who at the time the payment is made is aged 60 or over and resident in the United Kingdom,

(b) individuals each of whom at that time is aged 60 or over and resident in the United Kingdom, or

(c) two individuals who are married to each other at that time, at least one of whom is aged 60 or over at that time, and each of whom is resident in the United Kingdom at that time.

[F23 (2A) In a case where—

(a) a payment is made in respect of a premium under a contract at a time when the contract meets the requirement in subsection (2) above by virtue of paragraph (c) of that subsection, and

(b) a payment is made under the same contract at a time after one of the individuals has died and when the contract does not (apart from this subsection) meet the requirement in subsection (2) above by virtue only of the fact that the surviving spouse is not aged 60 or over at the time,

for the purposes of subsection (2) above in its application to the contract the surviving spouse shall be deemed to be aged 60 or over at the time mentioned in paragraph (b) above.]

(3) If the payment is made by an individual who at the time it is made is resident in the United Kingdom (whether or not he is the individual or one of the individuals insured by the contract) [F24 the individual shall be entitled to relief under this subsection in respect of the payment; and (except where subsections (4) to (6) below apply) relief under this subsection shall be given—

(a) in accordance with subsections (3A) to (3C) below, and

(b) only on a claim made for the purpose.]

[F25 (3A) Where an individual is entitled to relief under subsection (3) above in respect of one or more payments made in a given year of assessment, the amount of his liability for that year of assessment to income tax on his total income shall be the amount to which he would be liable apart from this section less whichever is the smaller of—

(a) the amount found under subsection (3B) below, and

(b) the amount which reduces his liability to nil.

(3B) The amount referred to in subsection (3A)(a) above is an amount found by—

(a) taking the amount of the payment referred to in subsection (3A) above or (as the case may be) the aggregate amount of the payments there referred to, and

(b) finding an amount equal to tax on the amount taken under paragraph (a) above at the basic rate for the year of assessment concerned.

(3C) In determining for the purposes of subsection (3A) above the amount of incomers on would be liable apart from this section, no account shall be taken of—

(a) any income tax reduction under Chapter I of Part VII of the Taxes Act 1988 or under section 347B of that Act;

(b) any income tax reduction under section 353(1A) of the Taxes Act 1988;

(c) any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 of the Taxes Act 1988 or by way of a credit under section 790(1) of that Act;

(d) any tax at the basic rate on so much of that person’s income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment.]

(4) In such cases and subject to such conditions as the Board may specify in regulations, relief under subsection (3) above shall be given in accordance with subsections (5) and (6) below.

(5) An individual who is entitled to such relief in respect of a payment may deduct and retain out of it an amount equal to income tax on it at the basic rate for the year of assessment in which it is made.

(6) The person to whom the payment is made—

(a) shall accept the amount paid after deduction in discharge of the individual’s liability to the same extent as if the deduction had not been made, and

(b) may, on making a claim [F26 in accordance with regulations], recover from the Board an amount equal to the amount deducted.

(7) The Treasury may make regulations providing that in circumstances prescribed in the regulations—

(a) an individual who has made a payment in respect of a premium under a contract of private medical insurance shall cease to be and be treated as not having been entitled to relief under subsection (3) above; and

(b) he or the person to whom the payment was made (depending on the terms of the regulations) shall account to the Board for tax from which relief has been given on the basis that the individual was so entitled.

(8) Regulations under subsection (7) above may include provision adapting or modifying the effect of any enactment relating to income tax in order to secure the performance of any obligation imposed under paragraph (b) of that subsection.

(9) In this section—

(a) references to a premium, in relation to a contract of insurance, are to any amount payable under the contract to the insurer, and

(b) references to an individual who is resident in the United Kingdom at anytime include references to an individual who is at that time performing duties which are treated by virtue of section 132(4)(a) of the Taxes Act 1988 as performed in the United Kingdom.]

Textual Amendments

F22 Ss. 54-57 repealed (31.1.1997 with effect as mentioned in Sch. 8 Pt. II(2), note of the amending Act) by 1997 c. 58, s. 52, Sch. 8 Pt. II(2) (with s. 3(3))

F23 S. 54(2A) inserted (3.5.1994 with effect as mentioned in Sch. 10 para. 4(2) of the amending Act) by 1994 c. 9, s. 83, Sch. 10 para. 4(1)

F24 Words and paras. (a)(b) substituted for words in s. 54(3) (3.5.1994 with effect in relation to payments on or after 6.4.1994) by 1994 c. 9, s. 83, Sch. 10 para. 2(2)(4)

F25 S. 54(3A)-(3C) inserted (3.5.1994 with effect in relation to payments on or after 6.4.1994) by 1994 c. 9, s. 83, Sch. 10 para. 2(3)(4)

F26 Words in s. 54(6)(b) inserted (29.4.1996) by 1996 c. 8, s. 129(2)

Modifications etc. (not altering text)

C8 S. 54 restricted (31.7.1997 with effect for the year 1997-1998 and subsequent years of assessment) by 1997 c. 58, s. 17(1)-(5) (with s. 3(3))

C9 For regulations see S.I. 1989/2387andS.I. 1989/2389 (in Part III Vol. 5under “Private medicalinsurance”)

[F27 55 Eligible contracts. U.K.

(1) This section has effect to determine whether a contract is at a particular time (the relevant time) an eligible contract for the purposes of section 54 above.

(2) A contract is an eligible contract at the relevant time if—

(a) it was entered into by an insurer who at the time it was entered into was a qualifying insurer and was approved by the Board for the purposes of this section,

(b) the period of insurance under the contract does not exceed one year(commencing with the date it was entered into),

[F28 (ba) at the relevant time the contract satisfies the conditions set out in subsection (2A) below,

(bb) the contract is not one in the case of which subsection (2D) below applies,]

(c) the contract is not connected with any other contract at the relevant time and has not been connected with any other contract at any time since it was entered into, [F29 and]

(d) no benefit has been provided by virtue of the contract other than an approved benefit, [F30 and

(e) the contract meets one or more of the three conditions set out below.]

[F31 (2A) The conditions referred to in subsection (2)(ba) above are that—

(a) the contract either provides indemnity in respect of all or any of the costs of all or any of the treatments, medical services and other matters for the time being specified in regulations made by the Treasury, or in addition to providing indemnity of that description provides cash benefits falling within rules for the time being so specified,

(b) the contract does not confer any right other than such a right as is mentioned in paragraph (a) above or is for the time being specified in regulations made by the Treasury,

(c) the premium under the contract is reasonable, and

(d) the contract satisfies such other requirements as are for the time being specified in regulations made by the Treasury.

(2B) In a case where—

(a) at the relevant time the contract confers a material right, or more than one such right, but

(b) the total cost to the insurer of providing benefits in pursuance of the material right or (as the case may be) in pursuance of all the material rights would not exceed the prescribed sum,

the contract shall not thereby be regarded as failing to satisfy at the relevant time the condition set out in subsection (2A)(b) above.

(2C) For the purposes of subsection (2B) above a material right is a right which—

(a) is not a right such as is mentioned in subsection (2A)(a) above or such as is for the time being specified in regulations made under subsection (2A)(b) above, and

(b) is not a right to a cash benefit.

(2D) This subsection applies in the case of a contract (the main contract) if—

(a) at least one other contract is entered into which is a contract (a collateral contract) under which a benefit is provided in consideration of the insured’s entering into the main contract, and

(b) the cost to the insurer of fulfilling his obligations under the collateral contract (or, if there is more than one collateral contract, of fulfilling his obligations under all of them) exceeds the prescribed sum.]

[F32 (3) The first condition is that the contract is certified by the Board under section 56 below at the relevant time.

F32 (4) The second condition is that, at the time the contract was entered into, it conformed with a standard form certified by the Board as a standard form of eligible contract.

F32 (5) The third condition is that, at the time the contract was entered into, it conformed with a form varying from a standard form so certified in no other respect than by making additions—

(a) which were (at the time the contract was entered into) certified by the Board as compatible with an eligible contract when made to that standard form, and

(b) which (at that time) satisfied any conditions subject to which the additions were so certified.

F32 (6) Where a contract is varied, and the relevant time falls after the time the variation takes effect, subsections (1) to (5) above shall have effect as if “entered into” read “varied” in each place where it occurs in subsections (4) and (5) above.]

(7) For the purposes of this section a contract is connected with another contract at any time if—

(a) they are simultaneously in force at that time,

(b) either of them was entered into with reference to the other, or with a view to enabling the other to be entered into on particular terms, or with a view to facilitating the other being entered into on particular terms, and

(c) the terms on which either of them was entered into would have been significantly less favourable to the insured if the other had not been entered into.

(8) For the purposes of this section each of the following is a qualifying insurer—

(a) an insurer lawfully carrying on in the United Kingdom business of any of the classes specified in Part I of Schedule 2 to the M2 Insurance Companies Act 1982;

(b) an insurer not carrying on business in the United Kingdom but carrying on business in another member State and being either a national of a member State or a company or partnership formed under the law of any part of the United Kingdom or another member State and having its registered office, central administration or principal place of business in a member State.

(9) For the purposes of this section a benefit is an approved benefit if it is provided in pursuance of a right of a description

[F33 (a) mentioned in subsection (2A)(a) above, or

(b) for the time being specified in regulations made under subsection (2A)(b) above.]

[F34 (10) For the purposes of this section a benefit is also an approved benefit if it is not a cash benefit and—

(a) it is a single benefit provided otherwise than as mentioned in subsection (9) above and the cost to the insurer of providing it does not exceed the prescribed sum, or

(b) it is one of a number of benefits provided otherwise than as mentioned in subsection (9) above and the total cost to the insurer of providing the benefits does not exceed the prescribed sum.

(11) In this section the reference to a premium, in relation to a contract of insurance, is to any amount payable under the contract to the insurer.

(12) For the purposes of this section the prescribed sum is £30.

(13) The Treasury may by order substitute for the sum for the time being specified in subsection (12) above such sum as may be specified in the order; and any such substitution shall have effect in relation to cases where the relevant time falls on or after such date as is specified in the order.]]

Textual Amendments

F27 Ss. 54-57 repealed (31.1.1997 with effect as mentioned in Sch. 8 Pt. II(2), note of the amending Act) by 1997 c. 58, s. 52, Sch. 8 Pt. II(2) (with s. 3(3))

F28 S. 55(2)(ba)(bb) inserted (3.5.1994 with effect as mentioned in Sch. 10 para. 5(8) of the amending Act) by 1994 c. 9, s. 83, Sch. 10 para. 5(2)

F29 Word in s. 55(2)(c) inserted (3.5.1994 with effect as mentioned in Sch. 10 para. 5(8) of the amending Act) by 1994 c. 9, s. 83, Sch. 10 para. 5(3)(a)

F30 S. 55(2)(e) and the word “and” immediately preceding it repealed (3.5.1994 with effect as mentioned in Sch. 10 para. 5(8) of the amending Act) by 1994 c. 9, ss. 83, 258, Sch. 10 para. 5(3)(b), Sch. 26 Pt. V(3), Note 2

F31 S. 55(2A)-(2D) inserted (3.5.1994 with effect as mentioned in Sch. 10 para. 5(8) of the amending Act) by 1994 c. 9, s. 83, Sch. 10 para. 5(4)

F32 S. 55(3)-(6) repealed (3.5.1994 with effect as mentioned in Sch. 10 para. 5(8) of the amending Act) by 1994 c. 9, ss. 83, 258, Sch. 10 para. 5(5), Sch. 26 Pt. V(3), Note 2

F33 Paras. (a)(b) substituted for words in s. 55(9) (3.5.1994 with effect as mentioned in Sch. 10 para. 5(8) of the amending Act) by 1994 c. 9, s. 83, Sch. 10 para. 5(6)

F34 S. 55(10)-(13) inserted (3.5.1994 with effect as mentioned in Sch. 10 para. 5(8) of the amending Act) by 1994 c. 9, s. 83, Sch. 10 para. 5(7)

Marginal Citations

M2 1982 c.50.

[F35 56 Certification of contracts. U.K.

(1) The Board shall certify a contract under this section if it satisfies the conditions set out in subsection (3) below; and the certification shall be expressed to take effect from the time the conditions are satisfied, and shall take effect accordingly.

(2) The Board shall revoke a certification of a contract under this section if it comes to their notice that the contract has ceased to satisfy the conditions set out in subsection (3) below; and the revocation shall be expressed to take effect from the time the conditions ceased to be satisfied, and shall take effect accordingly.

(3) The conditions referred to above are that—

(a) the contract either provides indemnity in respect of all or any of the costs of all or any of the treatments, medical services and other matters for the time being specified in regulations made by the Treasury, or in addition to providing indemnity of that description provides cash benefits falling within rules for the time being so specified,

(b) the contract does not confer any right other than such a right as is mentioned in paragraph (a) above or is for the time being specified in regulations made by the Treasury,

(c) the premium under the contract is in the Board’s opinion reasonable, and

(d) the contract satisfies such other requirements as are for the time being specified in regulations made by the Treasury.

(4) The certification of a contract by the Board under this section shall cease to have effect if the contract is varied; but this is without prejudice to the application of the preceding provisions of this section to the contract as varied.

(5) Where the Board refuse to certify a contract under this section, or they revoke a certification, an appeal may be made to the Special Commissioners by—

(a) the insurer, or

(b) any person who (if the policy were certified) would be entitled to relief under section 54 above.

(6) Where a contract is certified under this section, or a certification is revoked or otherwise ceases to have effect, any adjustments resulting from the certification or from its revocation or ceasing to have effect shall be made.

(7) Subsection (6) above applies where a certification or revocation takes place on appeal as it applies in the case of any other certification or revocation.

(8) In this section the reference to a premium, in relation to a contract of insurance, is to any amount payable under the contract to the insurer.]

Textual Amendments

F35 Ss. 54-57 repealed (31.1.1997 with effect as mentioned in Sch. 8 Pt. II(2), note of the amending Act) by 1997 c. 58, s. 52, Sch. 8 Pt. II(2) (with s. 3(3))

Modifications etc. (not altering text)

C10 For regulations see S.I. 1989/2389 (inPart III Vol. 5under “Private medical insurance”)

[F36 57 Medical insurance: supplementary. U.K.

(1) The Board may by regulations—

(a) provide that a claim under section 54(3) or (6)(b) above shall be made in such form and manner, shall be made at such time, and shall be accompanied by such documents, as may be prescribed;

[F37 (aa) make provision for and with respect to appeals against a decision of an officer of the Board or the Board with respect to a claim under section 54(6)(b) above;]

(b) make provision, in relation to payments in respect of which a person is entitled to relief under section 54 above, for the giving by insurers in such circumstances as may be prescribed of certificates of payment in such form as may be prescribed to such persons as may be prescribed;

(c) provide that a person who provides (or has at any time provided) insurance under contracts of private medical insurance shall comply with any notice which is served on him by the Board and which requires him within a prescribed period to make available for the Board’s inspection documents (of a prescribed kind) relating to such contracts;

(d) provide that persons of such a description as may be prescribed shall, within a prescribed period of being required to do so by the Board, furnish to the Board information (of a prescribed kind) about contracts of private medical insurance;

(e) make provision with respect to the approval of insurers for the purposes of section 55 above and the withdrawal of approval for the purposes of that section;

(f) make provision for and with respect to appeals against decisions of the Board with respect to the giving or withdrawal of approval of insurers for the purposes of section 55 above;

(g) make provision with respect to the certification by the Board of standard forms of eligible contract and variations from standard forms of eligible contract certified by them;

(h) make provision for and with respect to appeals against decisions of the Board with respect to the certification of standard forms of eligible contractor variations from standard forms of eligible contract certified by them;

(i) provide that certification, or the revocation of a certification, under section 56 above shall be carried out in such form and manner as may be prescribed;

(j) make provision with respect to appeals against decisions of the Board with respect to certification or the revocation of certification under section 56 above;

(k) make provision generally as to administration in connection with sections 54 to 56 above.

(2) The words “ Regulations under section 57 of the Finance Act 1989 ” shall be added at the end of each column in the Table in section 98 of the M3 Taxes Management Act 1970 (penalties for failure to furnish information etc.)

(3) The following provisions of the Taxes Management Act 1970, namely—

[F38 (a) section 29(1)(c) (excessive relief) as it has effect apart from section 29(2) to (10) of that Act;]

(b) section 30 (tax repaid in error etc.) [F39 apart from subsection (1B)],

(c) [F40 section 86] (interest), and

(d) section 95 (incorrect return or accounts),

[F41 shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable by virtue of section 54(6)(b) above but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as respects a chargeable period as a relief which was not due.]

[F42 (3A) In the application of section 86 of the Taxes Management Act 1970 by virtue of subsection (3) above in relation to sums due and payable by virtue of an assessment made under section 29(1)(c) or 30 of that Act, as applied by that subsection, the relevant date—

(a) in a case where the person falling within section 54(6) above has made any interim claim, within the meaning of regulations made under subsection (1) and section 54(4) above, as respects some part of the year of assessment for which the assessment is made, is 1st January in that year of assessment; and

(b) in any other case, is the later of the following dates, that is to say—

(i) 1st January in the year of assessment for which the assessment is made; or

(ii) the date of the making of the payment by the Board which gives rise to the assessment.]

(4) In sections F43 . . . 257D(8) and 265(3) of the Taxes Act 1988 after paragraph (c) there shall be inserted “or

(d) on account of any payments to which section 54(5) of the Finance Act 1989 applies”.

(5) In subsection (1) above—

• “eligible contract” has the meaning given by section 55 above, and

• “prescribed” means prescribed by or, in relation to form, under the regulations.]

Textual Amendments

F36 Ss. 54-57 repealed (31.1.1997 with effect as mentioned in Sch. 8 Pt. II(2), note of the amending Act) by 1997 c. 58, s. 52, Sch. 8 Pt. II(2) (with s. 3(3))

F37 S. 57(1)(aa) inserted (29.4.1996) by 1996 c. 8, s. 129(3)

F38 S. 57(3)(a) substituted (29.4.1996 with effect as mentioned in Sch. 18 para. 17 of the amending Act) by 1996 c. 8, s. 132, Sch. 18 para. 12(2)(a)

F39 Words in s. 57(3)(b) inserted (29.4.1996 with effect as mentioned in Sch. 18 para. 17 of the amending Act) by 1996 c. 8, s. 132, Sch. 18 para. 12(2)(b)

F40 Words in s. 57(3)(c) substituted (29.4.1996 with effect as mentioned in Sch. 18 para. 17 of the amending Act) by 1996 c. 8, s. 132, Sch. 18 para. 12(2)(c)

F41 Words in s. 57(3) substituted (29.4.1996 with effect as mentioned in Sch. 18 para. 17 of the amending Act) by 1996 c. 8, s. 132, Sch. 18 para. 12(2)(d)

F42 S. 57(3A) inserted (29.4.1996 with effect as mentioned in Sch. 18 para. 17 of the amending Act) by 1996 c. 8, s. 132, Sch. 18 para. 12(3)

F43 Words in s. 57(4) repealed (16.7.1992) by virtue of Finance (No. 2) Act 1992 (c. 48), ss. 20, 82, Sch. 5 para. 10, Sch. 18 Pt. VII(1)

Modifications etc. (not altering text)

C11 See S.I. 1989/2387

Marginal Citations

M3 1970 c. 9.

Charities U.K.

58 Payroll deduction scheme. U.K.

(1) In section 202(7) of the Taxes Act 1988 (which limits to £240 the deductions attracting relief) for “£240” there shall be substituted “£480”.

(2) This section shall have effect for the year 1989-90 and subsequent years of assessment.

F44 59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F44 S. 59 repealed (28.7.2000 with effect as mentioned in s. 41(9) of the amending Act) by 2000 c. 17, ss. 41(7), 156, Sch. 40 Pt. II(1), note 3

60 British Museum and Natural History Museum. U.K.

(1) In subsection (1) of section 507 of the Taxes Act 1988 (which gives tax exemption to the National Heritage Memorial Fund and the Historic Buildings and Monuments Commission) after paragraph (b) there shall be inserted—

“(c) the Trustees of the British Museum;

(d) the Trustees of the British Museum (Natural History);”and subsection (2) of that section (which gives partial tax exemption to those Trustees) shall cease to have effect.

(2) In section 339(9) of that Act, for the words from “the Trustees”(where those words first occur) to “History) and” there shall be substituted the words “each of the bodies mentioned in section 507, and in subsections (1) to (5) above includes”.

F45 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Subsection (1) above shall apply in relation to accounting periods ending on or after 14th March 1989, and [F46 subsection (2)] above shall apply to payments due on or after that day.

Textual Amendments

F45 S. 60(3) repealed (1.5.1995 with effect as mentioned in s. 74(2), Sch. 29 Pt. VIII(8) of the amending Act) by 1995 c. 4, ss. 74(1), 162, Sch. 17 Pt. III para. 25, Sch. 29 Pt. VIII(8)

F46 Words in s. 60(4) substituted (1.5.1995 with effect as mentioned in s. 74(2) of the amending Act) by 1995 c. 4, s. 74, Sch. 17 Pt. III para. 25

Profit-related pay, share schemes etc. U.K.

[F47 61 Profit-related pay. U.K.

Schedule 4 to this Act (which amends the provisions of the Taxes Act 1988 relating to profit-related pay) shall have effect.]

Textual Amendments

F47 S. 61 repealed (19.3.1997 with effect as mentioned in Sch. 18 Pt. VI(3), notes 1, 2 of the amending Act) by 1997 c. 16, ss. 61(2)(3), 113, Sch. 18 Pt. VI(3)

F48 62 Savings-related share option schemes. U.K.

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

Textual Amendments

F48 S. 62 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F49 63 Profit sharing schemes. U.K.

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

Textual Amendments

F49 S. 63 repealed(having effect for the year 1991-92 and subsequent years of assessment) by Finance Act 1991 (c. 31, SIF 63:1), s. 123, Sch. 19 Pt.V Note 6.

F50 64 Share option and profit sharing schemes: shares of consortium member. U.K.

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

Textual Amendments

F50 S. 64 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

65 Employee share schemes: material interest. U.K.

In Schedule 9 to the Taxes Act 1988 the following paragraph shall be inserted after paragraph 39—

“ Shares subject to an employee benefit trust

40 (1) Where an individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees shall not be regarded as associates of his by reason only of that interest unless sub-paragraph (3) below applies in relation to him.

(2) In this paragraph “employee benefit trust” has the same meaning as in paragraph 7 of Schedule 8.

(3) This sub-paragraph applies in relation to an individual if at any time on or after 14th March 1989—

(a) the individual, either on his own or with any one or more of his associates, or

(b) any associate of his, with or without other such associates,

has been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 25per cent., or in the case of a share option scheme which is not a savings-related share option scheme more than 10 per cent., of the ordinary share capital of the company.

(4) Sub-paragraphs (9) to (12) of paragraph 7 of Schedule 8 shall apply for the purposes of this paragraph in relation to an individual as they apply for the purposes of that paragraph in relation to an employee.”

F51 66 Priority share allocations for employees etc. U.K.

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

Textual Amendments

F51 S. 66 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

Employee share ownership trusts U.K.

67 Tax relief. U.K.

(1) This section applies where—

(a) a company expends a sum in making a payment by way of contribution to the trustees of a trust which is a qualifying employee share ownership trust at the time the sum is expended,

(b) at that time, the company or a company which it then controls has employees who are eligible to benefit under the terms of the trust deed,

(c) at that time the company is resident in the United Kingdom,

(d) before the expiry of the expenditure period the sum is expended by the trustees for one or more of the qualifying purposes, and

(e) before the end of the claim period a claim for relief under this section is made.

(2) In such a case the sum—

(a) shall be deducted in computing for the purposes of Schedule D the [F52 profits] of a trade carried on by the company, or

(b) if the company is an investment company or a company in the case of which section 75 of the Taxes Act 1988 applies by virtue of section 76 of that Act, shall be treated as expenses of management.

(3) For the purposes of subsection (1)(b) above, the question whether one company is controlled by another shall be construed in accordance with section840 of the Taxes Act 1988.

(4) For the purposes of subsection (1)(d) above each of the following is a qualifying purpose—

(a) the acquisition of shares in the company which established the trust;

(b) the repayment of sums borrowed;

(c) the payment of interest on sums borrowed;

(d) the payment of any sum to a person who is a beneficiary under the terms of the trust deed;

(e) the meeting of expenses.

(5) For the purposes of subsection (1)(d) above the expenditure period is the period of nine months beginning with the day following the end of the period of account in which the sum is charged as an expense of the company, or such longer period as the Board may allow by notice given to the company.

(6) For the purposes of subsection (1)(e) above the claim period is the period of two years beginning with the day following the end of the period of account in which the sum is charged as an expense of the company.

(7) For the purposes of this section the trustees of an employee share ownership trust shall be taken to expend sums paid to them in the order in which the sums are received by them (irrespective of the number of companies making payments).

Textual Amendments

F52 Words in s. 67(2)(a) substituted (31.7.1998) by 1998 c. 36, s. 46(3), Sch. 7 para. 3

Modifications etc. (not altering text)

C12 See Finance Act 1990 (c. 29) ss.31–40—.roll-over relief for disposal of assets to employeeshare ownership trusts

C13 S. 67 excluded (10.7.2003) by Finance Act 2003 (c. 14), s. 142(1)

68 Principal charges to tax. U.K.

(1) This section applies where a chargeable event (within the meaning of section 69 below) occurs in relation to the trustees of an employee share ownership trust.

(2) In such a case—

(a) the trustees shall be treated as receiving, when the event occurs, annual profits or gains whose amount is equal to the chargeable amount (within the meaning of section 70 below),

(b) the profits or gains shall be chargeable to tax under Case VI of Schedule D for the year of assessment in which the event occurs, and

(c) the rate at which the tax is chargeable shall be [F53 the rate applicable to trusts] for the year of assessment in which the event occurs.

(3) If the whole or any part of the tax assessed on the trustees is not paid before the expiry of the period of six months beginning with the day on which the assessment becomes final and conclusive, a notice of liability to tax under this subsection may be served on a qualifying company and the tax or the part unpaid (as the case may be) shall be payable by the company on service of the notice.

(4) Where a notice of liability is served under subsection (3) above—

(a) any interest which is due on the tax or the part (as the case may be) and has not been paid by the trustees, and

(b) any interest accruing due on the tax or the part (as the case may be)after the date of service,

shall be payable by the company.

(5) Where a notice of liability is served under subsection (3) above and any amount payable by the company (whether on account of tax or interest) is not paid by the company before the expiry of the period of three months beginning with the date of service, the amount unpaid may be recovered from the trustees(without prejudice to the right to recover it instead from the company).

(6) For the purposes of this section each of the following is a qualifying company—

(a) the company which established the employee share ownership trust;

(b) any company falling within subsection (7) below.

(7) A company falls within this subsection if, before it is sought to serve a notice of liability on it under subsection (3) above—

(a) it has paid a sum to the trustees, and

(b) the sum has been deducted as mentioned in section 67(2)(a) above or treated as mentioned in section 67(2)(b) above.

Textual Amendments

F53 Words in s. 68(2)(c) substituted (27.7.1993 with effect for the year 1993-94 and subsequent years of assessment) by 1993 c. 34, s. 79, Sch. 6 paras.20, 25(1)

Modifications etc. (not altering text)

C14 See Finance Act 1990 (c. 29) ss.31–40—.roll-over relief for disposal of assets to employee share ownership trusts

69 Chargeable events. U.K.

(1) For the purposes of section 68 above each of the following is a chargeable event in relation to the trustees of an employee share ownership trust—

(a) the transfer of securities by the trustees, if the transfer is not a qualifying transfer;

(b) the transfer of securities by the trustees to persons who are at the time of the transfer beneficiaries under the terms of the trust deed, if the terms on which the transfer is made are not qualifying terms;

(c) the retention of securities by the trustees at the expiry of the [F54 qualifying period] beginning with the date on which they acquired them;

(d) the expenditure of a sum by the trustees for a purpose other than a qualifying purpose.

[F55 (e) where—

(i) the trustees make a qualifying transfer within subsection (3AA) below for a consideration, and

(ii) they do not, during the period specified in subsection (5A) below, expend a sum of not less than the amount of that consideration for one or more qualifying purposes,

the expiry of that period.]

(2) For the purposes of subsection (1)(a) above a transfer is a qualifying transfer if it is made to a person who at the time of the transfer is a beneficiary under the terms of the trust deed.

(3) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if—

(a) it is made to the trustees of a scheme which at the time of the transfer is a profit sharing scheme approved under Schedule 9 to the Taxes Act 1988, and

(b) it is made for a consideration which is not less than the price the securities might reasonably be expected to fetch on a sale in the open market.

[F56 (3AA) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if—

(a) it is a transfer of relevant shares made to the trustees of the plan trust of [F57 a share incentive] plan,

(b) the plan is approved under [F58 Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003] when the transfer is made, and

(c) the consideration (if any) for which the transfer is made does not exceed the market value of the shares.

(3AB) For the purpose of determining whether a transfer by the trustees is a qualifying transfer within subsection (3AA) above, where on or after 21st March 2000—

(a) the trustees transfer or dispose of part of a holding of shares (whether by way of a qualifying transfer or otherwise), and

(b) the holding includes any relevant shares,

the relevant shares shall be treated as transferred or disposed of before any other shares included in that holding.

For this purpose “ holding ” means any number of shares of the same class held by the trustees, growing or diminishing as shares of that class are acquired or disposed of.

(3AC) For the purposes of subsections (3AA) and (3AB) above—

• “ market value ” has the same meaning as [F59 it has for the purposes of the SIP code (see paragraph 92 of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003)]; and

• “ relevant shares ” means—

  (i)

  shares that are held by the trustees of the employee share ownership trust at midnight on 20th March 2000, and

  (ii)

  shares purchased by those trustees with original funds after that time.

(3AD) For the purposes of subsection (3AC) above—

(a) “ original funds ” means any money held by the trustees of the employee share ownership trust in a bank or building society account at midnight on 20th March 2000, and

(b) any payment made by the trustees after that time (whether to acquire shares or otherwise) shall be treated as made out of original funds (and not out of money received after that time) until those funds are exhausted.]

F60 [(3A) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if it is made by way of exchange in circumstances mentioned in section 85(1) of the Capital Gains Tax Act 1979 or section 135(1) of the Taxation of Chargeable Gains Act 1992.]

(4) For the purposes of subsection (1)(b) above a transfer of securities is made on qualifying terms if—

(a) all the securities transferred at the same time [F61 other than those transferred on a transfer such as is mentioned in subsection (4ZA) below] are transferred on similar terms,

(b) securities have been offered to all the persons who are beneficiaries under the terms of the trust deed [F62 by virtue of a rule which conforms with paragraph 4(2), (3) or (4) of Schedule 5 to this Act] when the transfer is made, and

(c) securities are transferred to all such [F63 persons] who have accepted.

[F64 (4ZA) For the purposes of subsection (1)(b) above a transfer of securities is also made on qualifying terms if—

(a) it is made to a person exercising a right to acquire shares, and

(b) that right was obtained in accordance with the provisions of [F65 an SAYE option scheme within the meaning of the SAYE code (see section 516(4) of the Income Tax (Earnings and Pensions) Act 2003)]—

(i) which was established by, or by a company controlled by, the company which established the trust, and

(ii) which is approved under [F66 Schedule 3 to that Act], and

(c) that right is being exercised in accordance with the provisions of that scheme, and

(d) the consideration for the transfer is payable to the trustees.]

[F67 (4A) For the purposes of subsection (1)(c) above the qualifying period is—

(a) seven years, in the case of trusts established on or before the day on which the Finance Act 1994 was passed;

(b) twenty years, in the case of other trusts;

and for this purpose a trust is established when the deed under which it is established is executed.]

(5) For the purposes of subsection (1)(d) [F68 or (e)] above each of the following is a qualifying purpose—

(a) the acquisition of shares in the company which established the trust;

(b) the repayment of sums borrowed;

(c) the payment of interest on sums borrowed;

(d) the payment of any sum to a person who is a beneficiary under the terms of the trust deed;

(e) the meeting of expenses.

[F69 (5A) The period referred to in paragraph (e) of subsection (1) above is the period—

(a) beginning with the qualifying transfer mentioned in that paragraph, and

(b) ending nine months after the end of the period of account in which that qualifying transfer took place.

For this purpose the period of account means the period of account of the company that established the employee share ownership trust.]

(6) For the purposes of subsection (4) above, the fact that terms vary according to the levels of remuneration of beneficiaries, the length of their service, or similar factors, shall not be regarded as meaning that the terms are not similar.

(7) In ascertaining for the purposes of this section whether particular securities are retained, securities acquired earlier by the trustees shall be treated as transferred by them before securities acquired by them later.

(8) For the purposes of this section trustees—

(a) acquire securities when they become entitled to them (subject to the exceptions in subsection (9) below);

(b) transfer securities to another person when that other becomes entitled to them;

(c) retain securities if they remain entitled to them.

(9) The exceptions are these—

(a) if securities are issued to trustees in exchange in circumstances mentioned in section [F70 135(1) of the Taxation of Chargeable Gains Act 1992], they shall be treated as having acquired them when they became entitled to the securities for which they are exchanged;

(b) if trustees become entitled to securities as a result of a reorganisation, they shall be treated as having acquired them when they became entitled to the original shares which those securities represent (construing “reorganisation” and “original shares” in accordance with section [F70 126] of that Act).

(10) If trustees agree to take a transfer of securities, for the purposes of this section they shall be treated as becoming entitled to them when the agreement is made and not on a later transfer made pursuant to the agreement.

(11) If trustees agree to transfer securities to another person, for the purposes of this section the other person shall be treated as becoming entitled to them when the agreement is made and not on a later transfer made pursuant to the agreement.

(12) For the purposes of this section the following are securities—

(a) shares;

(b) debentures.

Textual Amendments

F54 Words in s. 69(1)(c) substituted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 6(2)

F55 S. 69(1)(e) inserted (28.7.2000) by 2000 c. 17, s. 55(2)

F56 S. 69(3AA)-(3AD) inserted (28.7.2000) by 2000 c. 17, s. 55(3)

F57 Words in s. 69(3AA)(a) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 160(2)(a) (with Sch. 7)

F58 Words in s. 69(3AA)(b) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 160(2)(b) (with Sch. 7)

F59 Words in s. 69(3AC) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 160(3) (with Sch. 7)

F60 S. 69(3A) inserted (16.7.1992, the amending provision applying in relation to exchanges made on or after 1.1.1992) by Finance (No. 2) Act 1992 (c. 48), s. 36(1)(2)

F61 Words in s. 69(4)(a) inserted (29.4.1996 with effect as mentioned in s. 120(12) of the amending Act) by 1996 c. 8, s. 120(3)(a)

F62 Words in s. 69(4)(b) inserted (29.4.1996 with effect as mentioned in s. 120(12) of the amending Act) by 1996 c. 8, s. 120(3)(b)

F63 Word in s. 69(4)(c) substituted (29.4.1996 with effect as mentioned in s. 120(12) of the amending Act) by 1996 c. 8, s. 120(3)(c)

F64 S. 69(4ZA) inserted (29.4.1996 with effect as mentioned in s. 120(12) of the amending Act) by 1996 c. 8, s. 120(4)

F65 Words in s. 69(4ZA)(b) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 160(4)(a) (with Sch. 7)

F66 Words in s. 69(4ZA)(b)(ii) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 160(4)(b) (with Sch. 7)

F67 S. 69(4A) inserted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 6(3)

F68 Words in s. 69(5) inserted (28.7.2000) by 2000 c. 17, s. 55(4)

F69 S. 69(5A) inserted (28.7.2000) by 2000 c. 17, s. 55(5)

F70 Words in s. 69(9) substituted (in relation to tax for the year 1992-1993 and subsequent years subject as mentioned in s. 289 of the substituting Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 19(1) (with s. 60, 101(1), 171, 201(3))

Modifications etc. (not altering text)

C15 See Finance Act 1990 (c. 29) ss.31–40—.roll-over relief for disposal of assets to employeeshare ownership trusts

C16 S. 69 modified (10.7.2003) by Finance Act 2003 (c. 14), s. 142(2)

C17 Definition employed for purposes of Finance Act1990 (c. 29) s. 36—roll-over relief where replacement assetowned

70 Chargeable amounts. U.K.

(1) This section has effect to determine the chargeable amount for the purposes of section 68 above.

(2) If the chargeable event falls within section 69(1)(a), (b) or (c) above the following rules shall apply—

(a) if the event constitutes a disposal of the securities by the trustees for the purposes of the [F71 Taxation of Chargeable Gains Act 1992], the chargeable amount is an amount equal to the sums allowable under section [F71 38(1)(a)] and (b) of that Act;

(b) if the event does not constitute such a disposal, the chargeable amount is an amount equal to the sums which would be so allowable had the trustees made a disposal of the securities for the purposes of that Act at the time the chargeable event occurs.

(3) If the chargeable event falls within section 69(1)(d) above the chargeable amount is an amount equal to the sum concerned.

[F72 (4) If the chargeable event falls within section 69(1)(e) above the chargeable amount is an amount equal to—

(a) the amount of the consideration received for the qualifying transfer mentioned in section 69(1)(e) above, less

(b) the amount of any expenditure by the trustees for a qualifying purpose during the period mentioned in section 69(5A) above.]

Textual Amendments

F71 Words in s. 70(2) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the substituting Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 19(2) (with ss. 60, 101(1), 201(3))

F72 S. 70(4) inserted (28.7.2000) by 2000 c. 17, s. 55(6)

Modifications etc. (not altering text)

C18 See Finance Act 1990 (c. 29) ss.31–40—.roll-over relief for disposal of assets to employeeshare ownership trusts

71 Further charges to tax: borrowing. U.K.

(1) This section applies where—

(a) a chargeable event (within the meaning of section 69 above) occurs in relation to the trustees of an employee share ownership trust,

(b) at the time the event occurs anything is outstanding in respect of the principal of an amount or amounts borrowed at any time by the trustees, and

(c) the chargeable event is one as regards which section 72(2)(b) below applies.

(2) In the following provisions of this section—

(a) “the initial chargeable event” means the event referred to in subsection (1)(a) above, and

(b) “the total outstanding amount” means the total amount outstanding, at the time the initial chargeable event occurs, in respect of the principal of an amount or amounts borrowed at any time by the trustees.

(3) If any of the total outstanding amount is repaid after the initial chargeable event occurs, a further chargeable event shall occur in relatio nto the trustees at the end of the year of assessment in which the repayment is made.

(4) In such a case—

(a) the trustees shall be treated as receiving, when the further event occurs, annual profits or gains whose amount is equal to the chargeable amount,

(b) the profits or gains shall be chargeable to tax under Case VI of Schedule D for the year of assessment at the end of which the further event occurs, and

(c) the rate at which the tax is chargeable shall be [F73 the rate applicable to trusts] for the year of assessment at the end of which the further event occurs.

(5) Subject to subsection (6) below, for the purposes of subsection (4) above the chargeable amount is an amount equal to the aggregate of the total outstanding amount repaid in the year of assessment.

(6) In a case where section 72(2)(b) below had effect in the case of the initial chargeable event, for the purposes of subsection (4) above the chargeable amount is an amount equal to the smaller of—

(a) the aggregate of the total outstanding amount repaid in the year of assessment, and

(b) an amount found by applying the formula A-B-C.

(7) For the purposes of subsection (6) above—

(a) A is the amount which would be the chargeable amount for the initial chargeable event apart from section 72(2) below,

(b) B is the chargeable amount for the initial chargeable event, and

(c) C is the amount (if any) found under subsection (8) below.

(8) If, before the further chargeable event occurs, one or more prior chargeable events have occurred in relation to the trustees by virtue of the prior repayment of any of the total outstanding amount found for the time the initial chargeable event occurs, the amount found under this subsection is an amount equal to the chargeable amount for the prior chargeable event or to the aggregate of the chargeable amounts for the prior chargeable events (as the case may be).

(9) In a case where—

(a) a chargeable event (within the meaning of section 69 above) occurs in relation to the trustees in circumstances mentioned in subsection (1) above,

(b) a sum falls to be included in the total outstanding amount found for the time the event occurs,

(c) another chargeable event (within the meaning of that section) occurs in relation to the trustees in circumstances mentioned in subsection (1) above, and

(d) the same sum or a part of it would (apart from this subsection) fall to be included in the total outstanding amount found for the time the event occurs,

the sum or part (as the case may be) shall not be included in the total outstanding amount found for the time the other chargeable event occurs.

(10) In ascertaining for the purposes of this section whether a repayment is in respect of a particular amount, amounts borrowed earlier shall be taken to be repaid before amounts borrowed later.

(11) Subsections (3) to (7) of section 68 above shall apply where tax is assessed by virtue of this section as they apply where tax is assessed by virtue of that section.

Textual Amendments

F73 Words in s. 71(4)(c) substituted (27.7.1993 with effect for the year 1993-94 and subsequent years of assessment) by 1993 c. 34, s. 79, Sch. 6 paras.20, 25(1)

Modifications etc. (not altering text)

C19 See Finance Act 1990 (c. 29) ss.31–40—.roll-over relief for disposal of assets to employeeshare ownership trusts

72 Limit on chargeable amount. U.K.

(1) For the purposes of this section each of the following is a chargeable event in relation to the trustees of an employee share ownership trust—

(a) an event which is a chargeable event by virtue of section 69 above;

(b) an event which is a chargeable event by virtue of section 71 above.

(2) If a chargeable event (the event in question) occurs in relation to the trustees of an employee share ownership trust, the following rules shall apply—

(a) the amount which would (apart from this subsection) be the chargeable amount for the event in question shall be aggregated, for the purposes of paragraph (b) below, with the chargeable amounts for other chargeable events(if any) occurring in relation to the trustees before the event in question,

(b) if the amount which would (apart from this subsection) be the chargeable amount for the event in question (or the aggregate found under paragraph (a)above, if there is one) exceeds the deductible amount, the chargeable amount for the event in question shall be the amount it would be apart from this subsection less an amount equal to the excess, and

(c) section 70(2) and (3) and section 71(5) above shall have effect subject to paragraph (b) above.

(3) For the purposes of subsection (2) above the deductible amount (as regards the event in question) is an amount equal to the total of the sums falling within subsection (4) below.

(4) A sum falls within this subsection if it has been received by the trustees before the occurrence of the event in question and—

(a) it has been deducted as mentioned in section 67(2)(a) above, or treated as mentioned in section 67(2)(b) above, before the occurrence of that event, or

(b) it would fall to be so deducted or treated if a claim for relief under section 67 above had been made immediately before the occurrence of that event.

Modifications etc. (not altering text)

C20 See Finance Act 1990 (c. 29) ss.31–40—.roll-over relief for disposal of assets to employeeshare ownership trusts

73 Information. U.K.

(1) An inspector may by notice in writing require a return to be made by the trustees of an employee share ownership trust if they have at any time received a sum which has been deducted as mentioned in section 67(2)(a) above or treated as mentioned in section 67(2)(b) above.

(2) Where he requires such a return to be made the inspector shall specify the information to be contained in it.

(3) The information which may be specified is information the inspector needs for the purposes of sections 68 to 72 above, and may include information about—

(a) sums received (including sums borrowed) by the trustees;

(b) expenditure incurred by them;

(c) assets acquired by them;

(d) transfers of assets made by them.

(4) The information which may be required under subsection (3)(a) above may include the persons from whom the sums were received.

(5) The information which may be required under subsection (3)(b) above may include the purpose of the expenditure and the persons receiving any sums.

(6) The information which may be specified under subsection (3)(c) above may include the persons from whom the assets were acquired and the consideration furnished by the trustees.

(7) The information which may be included under subsection (3)(d) above may include the persons to whom assets were transferred and the consideration furnished by them.

(8) In a case where a sum has been deducted as mentioned in section 67(2)(a)above, or treated as mentioned in section 67(2)(b) above, the inspector shall send to the trustees to whom the payment was made a certificate stating—

(a) that a sum has been so deducted or so treated, and

(b) what sum has been so deducted or so treated.

(9) In the Table in section 98 of the M4 Taxes Management Act1970 (penalties for failure to comply with notices etc.) at the end of the first column there shall be inserted— “ Section 73 of the Finance Act 1989 ”.

Modifications etc. (not altering text)

C21 See Finance Act 1990 (c. 29) ss.31–40—.roll-over relief for disposal of assets to employeeshare ownership trusts

Marginal Citations

M4 1970 c. 9.

74 Interpretation. U.K.

Schedule 5 to this Act shall have effect to determine whether, for the purposes of sections 67 to 73 above, a trust is at a particular time—

(a) an employee share ownership trust;

(b) a qualifying employee share ownership trust.

Modifications etc. (not altering text)

C22 See Finance Act 1990 (c. 29) ss.31–40—.roll-over relief for disposal of assets to employeeshare ownership trusts

Pensions etc. U.K.

75 Retirement benefits schemes. U.K.

Schedule 6 to this Act (which relates to retirement benefits schemes)shall have effect.

76 Non-approved retirement benefits schemes. U.K.

(1) In computing the amount of the [F74 profits] to be charged under Case I or Case II of Schedule D, no sum shall be deducted in respect of any expenses falling within subsection (2) or (3) below; [F75 and no expenses falling within either of those subsections shall be treated—

(a) for the purposes of section 75 of the Taxes Act 1988 (companies with investment business) as expenses of management, or

(b) for the purposes of section 76 of that Act (companies carrying on life assurance business) as expenses payable.]

(2) [F76 Subject to subsection (6A) below, expenses] fall within this subsection if—

(a) they are expenses of providing benefits pursuant to a relevant retirement benefits scheme, and

(b) the benefits are not ones in respect of which a person is on receipt chargeable to income tax.

(3) [F76 Subject to subsection (6A) below, expenses] fall within this subsection if—

(a) they are expenses of paying any sum pursuant to a relevant retirement benefits scheme with a view to the provision of any benefits, and

(b) the sum is not one which when paid [F77 counts as employment income of a person by virtue of section 386 (1) of the Income Tax (Earnings and Pensions) Act 2003 (charge on payments to non-approved retirement benefit schemes)] .

(4) No sum shall be deducted in respect of any expenses falling within subsection (5) or (6) below—

(a) in computing the amount of the [F74 profits] to be charged under Case I or Case II of Schedule D, or

[F78 (b) under section 75 or 76 of the Taxes Act 1988,]

unless the sum has actually been expended.

[F79 (4A) The reference in subsection (4) above to a sum being deducted shall be construed, so far as relating to section 76 of the Taxes Act 1988, as a reference to an amount being brought into account under that section as expenses payable.]

(5) [F76 Subject to subsection (6A) below, expenses] fall within this subsection if—

(a) they are expenses of providing benefits pursuant to a relevant retirement benefits scheme, and

(b) the benefits are ones in respect of which a person is on receipt chargeable to income tax.

(6) [F76 Subject to subsection (6A) below, expenses] fall within this subsection if—

(a) they are expenses of paying any sum pursuant to a relevant retirement benefits scheme with a view to the provision of any benefits, and

(b) the sum is one which when paid [F80 counts as employment income of a person by virtue of section 386 (1) of the Income Tax (Earnings and Pensions) Act 2003 (charge on payments to non-approved retirement benefit schemes)] .

[F81 (6A) Expenses to which subsection (6B) or (6C) below applies shall be treated as not falling within any of subsections (2), (3), (5) or (6) above.

(6B) This subsection applies to expenses of paying any sum, or of providing benefits, pursuant to a superannuation fund which satisfies the requirements of section 615(6) of the Taxes Act 1988.

(6C) This subsection applies to expenses of paying any sum, or of providing benefits, pursuant to a retirement benefits scheme which is established outside the United Kingdom and which the Board are satisfied corresponds to such a scheme as is mentioned in [F82 section 387(2) of the Income Tax (Earnings and Pensions) Act 2003], where the expenses are incurred for the benefit of:

(a) employees whose [F83 earnings] are [F84 earnings and amounts treated as earnings to which subsection (6D) applies] of the Taxes Act 1988; or

(b) employees who are not resident in the United Kingdom and whose duties are performed wholly outside the United Kingdom (and for this purpose duties performed in the United Kingdom the performance of which is merely incidental to the performance of other duties outside the United Kingdom shall be treated as performed outside the United Kingdom).]

[F85 (6D) This subsection applies to earnings and amounts treated as earnings for a year of assessment if—

(a) the [F86 employee] or office-holder is not domiciled in the United Kingdom in that year, and

(b) the employment is with a foreign employer.

(6E) If there is a dispute as to whether the employee or office-holder is not domiciled in the United Kingdom, sections 42 and 43 of the Income Tax (Earnings and Pensions) Act 2003 (Board to determine dispute as to domicile) apply to the dispute as they apply to a dispute mentioned in section 42(1) of that Act.]

(7) In this section—

• [F87 “earnings and amounts treated as earnings” means earnings and amounts treated as earnings which constitute employment income (see section 7(2)(a) or (b) of the Income Tax (Earnings and Pensions) Act 2003),

• “foreign employer” has the meaning given by section 721 of that Act,]

• “retirement benefits scheme” has the same meaning as in Chapter I of Part XIV of the Taxes Act 1988, and

• references to a relevant retirement benefits scheme are references to a retirement benefits scheme which is not of a description mentioned in [F88 section 387(2) of the Income Tax (Earnings and Pensions) Act 2003].

(8) This section has effect in relation to expenses incurred on or after the day on which this Act is passed.

Textual Amendments

F74 Words in s. 76(1)(4)(a) substituted (31.7.1998) by 1998 c. 36, s. 46(3), Sch. 7 para. 3

F75 Words in s. 76(1) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 43(2)

F76 Words in s. 76(2)(3)(5)(6) substituted (29.4.1996 with effect as mentioned in Sch. 39 para. 2(4) of the amending Act) by 1996 c. 8, s. 201, Sch. 39 Pt. I para. 2(2)

F77 Words in s. 76(3)(b) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 17 para. 10(4)(a)

F78 S. 76(4)(b) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 43(3)

F79 S. 76(4A) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 43(4)

F80 Words in s. 76(6)(b) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 17 para. 10(4)(a)

F81 S. 76(6A)-(6C) inserted (29.4.1996 with effect as mentioned in Sch. 39 para. 2(4) of the amending Act) by 1996 c. 8, s. 201, Sch. 39 Pt. I para. 2(3)

F82 Words in s. 76(6C) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 161(2)(a) (with Sch. 7)

F83 Word in s. 76(6C) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 161(2)(b) (with Sch. 7)

F84 Words in s. 76(6C) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 161(2)(c) (with Sch. 7)

F85 S. 76(6D)(6E) inserted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 161(3) (with Sch. 7)

F86 Word in s. 76(6D)(a) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 17 para. 10(4)(b)

F87 Words in s. 76(7) inserted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 161(4)(a) (with Sch. 7)

F88 Words in s. 76(7) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 161(4)(b) (with Sch. 7)

Modifications etc. (not altering text)

C23 S. 76 applied (31.7.1998 with effect as mentioned in s. 38(2)(3) of the 1998 c. 36) by 1988 c. 1, s. 21A(2) (as substituted by 1998 c. 36, s. 38(1), Sch. 5 Pt. I paras. 4, 73)

77 Personal pension schemes. U.K.

Schedule 7 to this Act (which relates to personal pension schemes) shall have effect.

Unit trusts etc. U.K.

78, 79. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F89 U.K.

Textual Amendments

F89 Ss. 78, 79 repealed by Finance Act 1990 (c. 29, SIF 58), s.132, Sch. 19 Pt. IV Note

F90 80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F90 S. 80 repealed (31.7.1998) by 1998 c. 36, s. 165, Sch. 27 Pt. III(23)

81 Offshore funds operating equalisation arrangements. U.K.

(1) In section 758 of the Taxes Act 1988 (offshore funds operating equalisation arrangements) in subsection (6) (reference to section 78 of the M5 Capital Gains Tax Act 1979 not to include reference to it as applied by section 82) for the words “but not” there shall be substituted the words “and a reference to section 78”.

(2) This section shall apply where a conversion of securities occurs on or after 14th March 1989; and “conversion of securities” here has the same meaning as in section 82 of the Capital Gains Tax Act 1979.

Marginal Citations

M5 1979 c. 14.

Life assurance U.K.

[F91 82 Calculation of profits: bonuses etc U.K.

(1) This section and sections 82A [F92 to 82C] below have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D.

(2) Any amounts which are allocated to policy holders or annuitants in respect of a period of account are allowed as a deduction in calculating the profits for the period of account.

(3) For the purposes of subsection (2) above, an amount is allocated to policy holders or annuitants if (but only if)—

(a) bonus payments are made to them,

(b) reversionary bonuses are declared in their favour, or

(c) a reduction is made in the premiums payable by them.

(4) Where an amount is allocated to policy holders or annuitants for the purposes of subsection (2) above, the amount of the allocation is—

(a) in the case of bonus payments, the amount of the payments,

(b) in the case of declared reversionary bonuses, the amount of the liabilities assumed by the company in consequence of the declaration, and

(c) in the case of a reduction in premiums, the amount of the liabilities assumed by the company in consequence of the reduction.

Textual Amendments

F91 Ss. 82-82B substituted for s. 82 (with effect in accordance with Sch. 33 para. 1(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 1(1)

F92 Words in s. 82(1) substituted (with effect in accordance with Sch. 7 para. 5(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 7 para. 5(1)

Modifications etc. (not altering text)

C24 S. 82 modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (SI 1997/473), reg. 32 (as substituted (8.4.2004) by S.I. 2004/822, regs. 1, 27)

82A Calculation of profits: policy holders' tax U.K.

(1) Tax expended on behalf of policy holders or annuitants is allowed as a deduction in calculating the profits to the extent (but only to the extent) that regulations made by the Treasury so provide.

(2) The regulations may include provision for tax so expended to be so allowed even if it is not brought into account.

(3) The regulations—

(a) may make different provision for different cases, and

(b) may include provision having effect in relation to periods of account during which they are made.

Textual Amendments

F91 Ss. 82-82B substituted for s. 82 (with effect in accordance with Sch. 33 para. 1(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 1(1)

82B Unappropriated surplus on valuation U.K.

(1) This section applies in relation to a period of account of the insurance company (“ the period of account in question ”) where—

(a) at the end of the period of account in question the company has an unappropriated surplus on valuation as shown in the return deposited with the Financial Services Authority under section 9.6 of the Prudential Sourcebook (Insurers) (an “ unappropriated surplus ”), and

(b) the company has not made an election in accordance with Rule 4.1(6) of the Prudential Sourcebook (Insurers) covering the period of account in question.

(2) Where the company did not have an unappropriated surplus at the end of the period of account immediately preceding the period of account in question, so much of the unappropriated surplus at the end of the period of account in question as is required to meet the duty of fairness is allowed as a deduction in calculating the profits for the period of account in question.

(3) Where the company did have an unappropriated surplus at the end of that immediately preceding period of account—

(a) if so much of the unappropriated surplus at the end of the period of account in question as is required to meet the duty of fairness exceeds so much of the unappropriated surplus at the end of that immediately preceding period of account as was required to meet that duty, the excess is allowed as a deduction in calculating the profits for the period of account in question, but

(b) if so much of the unappropriated surplus at the end of that immediately preceding period of account as was required to meet the duty of fairness exceeds so much of the unappropriated surplus at the end of the period of account in question as is required to meet that duty, the excess is to be taken into account as a receipt of the period of account in question.

(4) In arriving for the purposes of this section at the amount of the unappropriated surplus which is or was required to meet the duty of fairness there is to be deducted the aggregate of amounts which—

(a) for periods of account ending before 14th March 1989 (and the first notional period of account, within the meaning of section 82 above as originally enacted) have been excluded, by virtue of section 433 of the Taxes Act 1988, as being reserved for policy holders or annuitants, and

(b) have not before that date either been allocated to or expended on behalf of policy holders or annuitants or been treated as profits of an accounting period on ceasing to be so reserved.

(5) References in this section to the company’s duty of fairness are to the company’s duty to treat its policy holders and annuitants fairly with regard to terminal bonuses.]

Textual Amendments

F91 Ss. 82-82B substituted for s. 82 (with effect in accordance with Sch. 33 para. 1(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 1(1)

Modifications etc. (not altering text)

C25 S. 82B applied (with modifications) (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 1(6)

C26 S. 82B modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/437), reg. 32A (as inserted (8.4.2004) by S.I. 2004/822, regs. 1, 28)

[F93 82C Relevant financial reinsurance contracts U.K.

(1) This section applies where—

(a) an insurance company (“the company”) enters into a contract of reinsurance which is a relevant financial reinsurance contract, and

(b) either condition A or condition B is met.

(2) A contract of reinsurance is a relevant financial reinsurance contract if, under the contract—

(a) some or all of the liabilities reinsured may cease to be reinsured (without the cedant having any right of recovery against the reinsurer), or

(b) the cedant may become liable to pay premiums wholly or partly determined (directly or indirectly) by reference to any amount which the reinsurer becomes liable to pay to the cedant under the contract.

(3) Condition A is that the reduction in the company’s liabilities resulting from the reinsurance under the relevant financial reinsurance contract is not taken into account in calculating the profits of the company.

(4) Condition B is that—

(a) an insurance business transfer scheme has effect to transfer long-term business to the company,

(b) there is a deficiency of assets on the transfer,

(c) the liabilities reinsured under the relevant financial reinsurance contract are some or all of the liabilities to policy holders and annuitants transferred,

(d) the reduction of the company’s liabilities resulting from the reinsurance of those liabilities under the relevant financial reinsurance contract occurs during the period of account in which the transfer takes place, and

(e) the whole amount of the liabilities to policy holders and annuitants transferred is not taken into account as opening liabilities in calculating the profits of the company for that period of account.

(5) For the purposes of subsection (4)(b) above there is a deficiency of assets on the transfer if—

(a) the aggregate amount of the liabilities to policy holders and annuitants, and of any debts, which are transferred, exceeds

(b) the value of the assets transferred and brought into account in the long-term insurance fund of the company.

(6) The reinsurance offset amount for each period of account of the company beginning before the termination of the relevant financial reinsurance contract is to be taken into account as a receipt of the period of account.

(7) The reinsurance offset amount for a period of account is the amount of any decrease in the period of account in the difference between the full liabilities and the reduced liabilities where—

(a) “the full liabilities” is the amount which would be brought into account for the period as liabilities but for the relevant financial reinsurance contract, and

(b) “the reduced liabilities” is the amount of the liabilities actually so brought into account.

(8) But, in a case in which condition B is met, the total amount taken into account by virtue of subsection (6) above must not exceed the amount by which—

(a) the aggregate amount mentioned in paragraph (a) of subsection (5) above, exceeds

(b) the value referred to in paragraph (b) of that subsection.

(9) For the purposes of this section “insurance business transfer scheme” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).]

Textual Amendments

F93 S. 82C inserted (with effect in accordance with Sch. 7 para. 5(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 7 para. 5(2)

[F94 83 Receipts to be [F95 taken] into account. U.K.

(1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D.

[F96 (2) There shall be taken into account as receipts of a period of account amounts (so far as referable to that business) brought into account for the period of account as—

(a) investment income receivable before deduction of tax,

(b) an increase in the value of non-linked assets,

(c) an increase in the value of linked assets, F97 ...

(d) other income; [F98 or

(e) business transfers-in.]

and if amounts (so far as so referable) are brought into account for a period of account as a decrease in the value of non-linked assets or a decrease in the value of linked assets they shall be taken into account as an expense of the period of account.

(2A) But subsection (2) above does not require to be taken into account as receipts of a period of account so much of the amounts brought into account as mentioned in [F99 paragraphs (a) to (e)] of that subsection for the period of account as—

(a) is entirely notional because an amount corresponding to it would fall to be brought into account as an expense (for that or any other period of account),

(b) is exempted by section 444AC(2) of the Taxes Act 1988 (transfers of business), or

(c) consists of interest paid under section 826 of the Taxes Act 1988 (interest on tax overpaid) in respect of a repayment or payment relating to an accounting period of the company ending before 1st July 1999;

but, subject to that, the whole of the amounts so brought into account for a period of account shall be taken into account as receipts of the period of account.

(2B) If any assets of the company’s long-term insurance fund are transferred by the company so that they cease to be assets of that fund, but the transfer is not brought into account as part of total expenditure[F100 , or as a business transfer-out,] for the period of account in which the transfer takes place or any earlier period of account, the fair value of the assets at the time of the transfer shall be deemed to be brought into account for the period of account in which the transfer takes place as an increase in the value of the assets of that fund unless the assets are excluded from this subsection by—

(a) subsection (2C) or (2D) below, or

(b) section 444AD of the Taxes Act 1988 (transfers of business).

(2C) Assets transferred to discharge liabilities in respect of deposits received from reinsurers or arising out of insurance operations, debenture loans or amounts borrowed from credit institutions are included in subsection (2B) above only if the deposits, loans or amounts borrowed—

(a) were brought into account for any period of account, but

(b) were not taken into account as receipts of the period of account under subsection (2) above.

(2D) Assets are excluded from subsection (2B) above if they are transferred for at least their fair value and the consideration for their transfer, when received, forms part of the company’s long-term insurance fund.

(2E) If subsection (2B) above applies in relation to the transfer of all the assets of the company’s long term insurance fund in accordance with—

(a) an insurance business transfer scheme, or

(b) a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State),

the reference in that subsection to an amount being deemed to be brought into account for the period of account in which the transfer takes place is to its being so deemed for the period of account ending immediately before the transfer takes place.]

[F101 (3) In ascertaining whether or to what extent a company has incurred a loss in respect of [F102 its life assurance business in a case where assets are] added to the company’s [F103 long-term insurance] fund as part of or in connection with—

(a) a transfer of business to the company, or

(b) a demutualisation of the company not involving a transfer of business,

that amount shall (subject to subsection (4) below) be taken into account [F104 under subsection (2) above], for the period for which it is brought into account, as an increase in value of the assets of [F105 the long-term insurance fund].

(4) Subsection (3) above does not apply where, or to the extent that, the amount concerned—

(a) would fall to be taken into account as a receipt apart from this section,

(b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or

[F106 (c) represents so much of the proceeds of the disposal of an asset of the long-term insurance fund as does not exceed its fair value or an asset acquired for at least its fair value which is added to that fund.]

(5) Any amount which is to be taken into account pursuant to subsection (3) above for a period of account shall be so taken into account—

(a) after the making of any reduction under subsection (6) of section 83AA below in relation to that period, F107 ...

F107 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) In subsection (3) above “ transfer of business ” means—

[F108 (a) a transfer, under an insurance business transfer scheme, of business which consists of the effecting or carrying out of contracts of long-term insurance;]

(b) a qualifying overseas transfer, within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act 1988; or

(c) the making of a contract of reinsurance which, in whole or in part, constitutes or forms part of a total reinsurance by the reinsured, unless the reinsurer under the contract falls within section 439A of the Taxes Act 1988 (pure reinsurance).

F109 (6A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F110 (6B) A contract which reinsures risk in respect of insurances to be made only after the making of the contract of reinsurance can constitute a transfer of business by virtue of subsection (6)(c) above only if a potential advantage is conferred on the reinsurer by the contract.

(6C) For the purposes of subsection (6B) above a potential advantage is conferred on the reinsurer by the contract if, taking the contract as “the actual provision” for the purposes of Schedule 28AA to the Taxes Act 1988, the effect of making the actual provision instead of the arm’s length provision (within the meaning of that Schedule) would have in relation to the reinsurer the effect specified in paragraph 5(1)(b) of that Schedule.]

(7) For the purposes of subsection (3)(a) above, a transfer of business falling within subsection (6)(c) above shall be treated as a transfer of business to the company which is the reinsurer under the contract of reinsurance.

(8) In this section—

• “ add ”, in relation to an amount and a company’s [F111 long-term insurance] fund, includes transfer (whether from other assets of the company or otherwise);

• “ demutualisation ” means the conversion, under the law of any territory, of a company which has been carrying on insurance business without having a share capital into a company with a share capital, without any change of legal personality;

• [F112 “fair value”, in relation to assets, means the amount which would be obtained from an independent person purchasing them or, if the assets are money, its amount;]

• “ total reinsurance ” means the reinsurance (whether effected by a single contract of reinsurance or by two or more such contracts, taken together, whether or not made with the same reinsurer) of the whole, or substantially the whole, of the reinsured’s risk—

  (a)

  under policies of a particular description issued in respect of insurances made in the course of carrying on life assurance business F113 ...; or

  (b)

  under contracts of a particular description so made.

This subsection does not apply where, or to the extent that, the amount concerned—

(a)

would fall to be taken into account as a receipt apart from this section,

(b)

is otherwise taken into account under subsection (2) above, or

(c)

is specifically exempted from tax.]]

Textual Amendments

F94 Ss. 83, 83A substituted for s. 83 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 16(1) (with Sch. 8 paras. 55(2), 57(1))

F95 Word in s. 83 heading substituted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(10)

F96 S. 83(2)-(2E) substituted for s. 83(2) (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(2)

F97 Word in s. 83(2)(c) omitted (with effect in accordance with art. 1 of the amending S.I.) by virtue of The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 8(2)(a)

F98 S. 83(2)(e) and preceding word added (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 8(2)(b)

F99 Words in s. 83(2A) substituted (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 8(3)

F100 Words in s. 83(2B) inserted (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 8(4)

F101 S. 83(3)-(8) substituted for s. 83(3) (29.4.1996 with effect as mentioned in Sch. 31 para. 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 4

F102 Words in s. 83(3) substituted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(3)(a)

F103 Words in s. 83(2)(a)(3) substituted (1.12.2001) by S.I. 2001/329, art. 60(1)(a)

F104 Words in s. 83(3) inserted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(3)(b)

F105 Words in s. 83(3) substituted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(3)(c)

F106 S. 83(4)(c) substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 2(4)

F107 S. 83(5)(b) and preceding word repealed (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(5), Sch. 43 Pt. 3(12)

F108 S. 83(6)(a) substituted (1.12.2001 with effect as mentioned in art. 56(4) of the amending S.I.) by S.I. 2001/3629, art. 56(2)

F109 S. 83(6A) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F110 S. 83(6B)(6C) inserted (with effect in accordance with Sch. 33 para. 2(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(6)

F111 Words in the definition of “add” in s. 83(8) substituted (1.12.2001) by S.I. 2001/3629, art. 60(1)(a)

F112 Words in s. 83(8) inserted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(8)

F113 Words in s. 83(8) repealed (with effect in accordance with Sch. 33 para. 2(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(9), Sch. 43 Pt. 3(12)

Modifications etc. (not altering text)

C27 S. 83 applied (1.5.1995) by 1988 c. 1, s. 439B(3)(a) (as inserted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 27(1) (with Sch. 8 paras. 55(2), 57(1)))

S. 83 modified (retrospective to 1.1.1995) by S.I. 1997/473, regs. 1(2), 33, 34

C28 S. 83 modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), reg. 33 (as amended (8.4.2004) by S.I. 2004/822, regs. 1, 29)

C29 S. 83 amendment to earlier affecting provision SI 1997/473 (8.4.2004) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2004 (S.I. 2004/822), regs. 1, 30

C30 S. 83(6) modified (retrospective to 1.1.1996) by S.I. 1997/743, regs. 1(2), 35 (as amended (1.12.2001) by S.I. 2001/3629, arts. 160, 165(1)(b))

C31 S. 83(6) amendment to earlier affecting provision SI 1997/473 (8.4.2004) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2004 (S.I. 2004/822), regs. 1, 30

[F114 83ZA Contingent loans U.K.

(1) For the purposes of this section a contingent loan is made to an insurance company if—

(a) a deposit is received by the company from a reinsurer or arises out of insurance operations of the company,

(b) a debenture loan is made to the company, or

(c) an amount is borrowed by the company from a credit institution,

and the deposit, debenture loan or amount borrowed is taken into account as a receipt of the company under section 83(2) above.

(2) For the purposes of this section the time when a contingent loan is made to an insurance company is the time when the assets constituting the deposit, debenture loan or amount borrowed are received by the company.

(3) For the purposes of this section an insurance company has unrepaid contingent loan liabilities at any time if—

(a) one or more contingent loans have been made to the company at or before that time, and

(b) amounts will or may at some later time become repayable by the company in respect of the contingent loan or contingent loans.

(4) Where, at the end of the period of account of an insurance company (“the period of account in question”), the company has unrepaid contingent loan liabilities—

(a) subsection (5) below applies if the company did not have unrepaid contingent loan liabilities at the end of the period of account immediately preceding the period of account in question, and

(b) subsection (6) below applies if it did.

(5) Where this subsection applies, the appropriate amount for the period of account in question is allowed as a deduction in calculating the profits of the company for the period of account in question.

(6) Where this subsection applies—

(a) if the appropriate amount for the period of account in question exceeds the appropriate amount for the immediately preceding period of account, the excess is allowed as a deduction in calculating the profits for the period of account in question, but

(b) if the appropriate amount for the immediately preceding period of account exceeds the appropriate amount for the period of account in question, the excess is to be taken into account as a receipt of the period of account in question.

(7) For the purposes of subsections (5) and (6) above the appropriate amount for a period of account is the amount of the unrepaid contingent loan liabilities at the end of the period of account reduced (but not below nil) by the aggregate of—

(a) any relevant net transfers to shareholders, and

(b) any deficiencies of assets over liabilities received on relevant transferred business.

(8) In subsection (7)(a) above “relevant net transfers to shareholders” means the aggregate of the positive amounts brought into account as transfers to non-technical account for—

(a) the period of account,

(b) the period of account in which the relevant contingent loan was made to the company, and

(c) any period of account falling between the periods of account mentioned in paragraphs (a) and (b) above,

as reduced in accordance with subsection (9) below.

(9) The reduction to be made from the positive amount brought into account as a transfer to non-technical account for any of the periods of account mentioned in subsection (8) above is so much of the positive amount as does not exceed 12% of the amount allocated to policy holders as bonuses in relation to the period of account.

(10) In subsection (7)(b) above “deficiencies of assets over liabilities received on relevant transferred business” means any amount by which, on an insurance business transfer scheme having effect to transfer long-term business from a person (“the transferor”) to the company which has taken place since the time when the relevant contingent loan was made to the company—

(a) the amount of the liabilities to policy holders and annuitants transferred to the company, exceeded

(b) the element of the company’s [F115 line 31 figure] representing the transferor’s long-term insurance fund.

(11) In subsections (8) and (10) above “the relevant contingent loan” means—

(a) if amounts will or may at some later time become repayable by the company in respect of only one contingent loan, that contingent loan, and

(b) if amounts will or may at some later time become repayable by the company in respect of more than one contingent loan, whichever of those contingent loans was made to the company first.

(12) In subsection (10)(b) above “the element of the company’s [F116 line 31 figure] representing the transferor’s long-term insurance fund” means so much of the amount brought into account by the company [F117 as business transfers-in] in the period of account in which the transfer took place as represents the assets transferred to the company.

(13) Where in a period of account of an insurance company—

(a) an amount becomes repayable under a contingent loan made to the company, and

(b) the amount repayable is brought into account as other expenses for the period of account,

so much of the amount repayable as does not exceed the amount specified in subsection (14) below is allowed as a deduction in calculating the profits of the company for the period of account.

(14) The amount referred to in subsection (13) above is the amount arrived at by deducting from the amount taken into account as a receipt of the company under section 83(2) above in relation to the contingent loan the aggregate of any amounts which—

(a) have become repayable in respect of the contingent loan in any earlier period of account, and

(b) have been allowed as a deduction in calculating the profits of the company for any such period.

(15) The references in subsections (8), (12) and (13) above to an amount being brought into account—

(a) in a case where the amount taken into account as a receipt of the company under section 83(2) above in relation to the contingent loan or loans in question is an amount brought into account in an account concerned wholly with non-participating business, are to its being brought into account in that account or in any other account concerned wholly with non-participating business, and

(b) in a case where the amount so taken into account is an amount brought into account in an account concerned wholly or partly with participating business, are to its being brought into account in that account or in any other account concerned wholly or partly with participating business.

(16) Where—

(a) a transfer to another fund brought into account for a period of account as other expenditure in any account concerned wholly with non-participating business is brought into account as other income in an account concerned wholly or partly with participating business, or

(b) a transfer to another fund brought into account for a period of account as other expenditure in any account concerned wholly or partly with participating business is brought into account as other income in an account concerned wholly with non-participating business,

subsection (8) above has effect as if it were a positive amount brought into account as transfers to non-technical account for that period of account in the account in which it is brought into account as other expenditure.

(17) For the purposes of subsections (15) and (16) above—

(a) an account is concerned wholly with non-participating business if it relates exclusively to policies or contracts under which the policy holders or annuitants are not eligible to participate in surplus, and

(b) an account is concerned wholly or partly with participating business if it relates wholly or partly to other policies or contracts.]

Textual Amendments

F114 S. 83ZA inserted (with effect in accordance with Sch. 33 para. 3(3) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 3(1)

F115 Words in s. 83ZA(10)(b) substituted (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 9(2)

F116 Words in s. 83ZA(12) substituted (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 9(2)

F117 Words in s. 83ZA(12) substituted (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 9(3)

[F118 83A Meaning of “brought into account”. U.K.

(1) [F119 In sections [F120 82A] to 83AB] “brought into account” means brought into account in an account which is recognised for the purposes of [F121 those sections].

(2) Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of [F122 those sections] are—

(a) a revenue account prepared for the purposes of [F123 Chapter 9 of the Prudential Sourcebook (Insurers)] in respect of the whole of the company’s [F124 long-term] business;

(b) any separate revenue account required to be prepared [F125 under that Chapter] in respect of a part of that business.

F126 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business.

(4) If in any such case the total of the items brought into account in the separate accounts is not equal to the total amount brought into account in the account prepared for the whole business, there shall be treated as having been required and prepared a further separate revenue account covering the balance.

F127 ( 5 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F118 SS. 83, 83A substituted for s. 83 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 16(1) (with Sch. 8 paras. 55(2), 57(1))

F119 Words in s. 83A(1) substituted (29.4.1996 with effect as mentioned in Sch. 31 para. 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 6(1)(a)

F120 Word in s. 83A(1) substituted (with effect in accordance with Sch. 33 para. 1(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 1(2)

F121 Words in s. 83A(1) substituted (29.4.1996 with effect as mentioned in Sch. 31 para. 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 6(1)(b)

F122 Words in s. 83A(2) substituted (29.4.1996 with effect as mentioned in Sch. 31 para. 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 6(2)

F123 Words in s. 83A(2)(a) substituted (1.12.2001 with effect as mentioned in art. 57(2) of the amending Act) by S.I. 2001/3629, art. 57(1)(a)

F124 Words in s. 83A(2)(a) substituted (1.12.2001) by S.I. 2001/3629, art. 60(2)(a)

F125 Words in s. 83A(2)(b) substituted (1.12.2001 with effect as mentioned in art. 57(2) of the amending Act) by S.I. 2001/3629, art. 57(1)(b)

F126 Words in s. 83A(2) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F127 S. 83A(5) repealed (1.1.1996) by 1996 c. 8, s. 205, Sch. 41 Pt. V(26), note

Modifications etc. (not altering text)

C32 S. 83A modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), regs. 1(2), 36, 37 (as amended (30.1.2003) by S.I. 2003/23, regs. 1, 8; (8.4.2004) by S.I. 2004/822, regs. 1, 31, 32)

[F128 83AA Amounts added to [F129 long term insurance] fund of a company in excess of that company’s loss. U.K.

(1) If one or more relevant amounts are brought into account for a period of account of a company and either—

(a) the aggregate of those amounts exceeds the loss which, after the making of any reduction under subsection (6) below but before any application of section 83(3) above in relation to that period, would have arisen to the company in that period in respect of its life assurance business, or

(b) no such loss would have so arisen,

the surplus for that period shall be applied in accordance with the following provisions of this section and section 83AB below.

(2) In this section—

• “ relevant amount ” means so much of any amount which is added to the [F130 long-term insurance ] fund of a company as mentioned in subsection (3) of section 83 above as does not fall within any of the paragraphs of subsection (4) of that section;

  “ surplus ”, in relation to a period of account of a company, means (subject to section 83AB(2) below)—

(a) if the aggregate of the relevant amounts brought into account for that period exceeds the amount of any loss which, after the making of any reduction under subsection (6) below but before any application of section 83(3) above in relation to that period, would have arisen to the company in that period in respect of its life assurance business, the amount of the excess; or

(b) if no such loss would have so arisen, the aggregate of the relevant amounts brought into account for that period.

F131 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F131 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F131 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Any loss arising to a company in respect of its life assurance business in a period of account subsequent to one for which there is a surplus shall be reduced (but not below nil) by so much of that surplus as cannot be applied—

F132 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) under this subsection, in the reduction of a loss arising to the company in an earlier period of account; or

(c) under section 83AB below, in relation to a transfer of business from the company in that or any earlier period of account.

(7) Any reduction pursuant to subsection (6) above of a loss arising to a company in a period of account shall be made—

(a) before any application of section 83(3) above in relation to that period, F133 ...

F133 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) A surplus in respect of an earlier period of account shall be applied under subsection (6) above before a surplus in respect of a later period of account.

(9) All such adjustments to the liability to tax of any person shall be made, whether by assessment or otherwise, as may be required to give effect to this section.

(10) In this section—

• “ add ” has the same meaning as in section 83 above;

  F134 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“ transfer of business ” has the same meaning as in section 83(3) above;

F134 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) A transfer of business falling within section 83(6)(c) above shall be treated for the purposes of this section as a transfer of business from the company which is the reinsured under the contract of reinsurance.]

Textual Amendments

F128 Ss. 83AA, 83AB inserted (29.4.1996 with effect as mentioned in Sch. 31 paras. 9(1), 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 5

F129 Words in s. 83AA(3)(4) and the sidenote substituted (1.12.2001) by S.I. 2001/3629, art. 60(1)(b)

F130 Words in the definition of “relevant amount” in s. 83AA(2) substituted (1.12.2001) by S.I. 2001/3629, art. 60(1)(b)

F131 Ss. 83AA(3)-(5) repealed (with effect in accordance with Sch. 33 para. 4(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 4(1)(a), Sch. 43 Pt. 3(12)

F132 S. 83AA(6)(a) repealed (with effect in accordance with Sch. 33 para. 4(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 4(1)(b), Sch. 43 Pt. 3(12)

F133 S. 83AA(7)(b) and preceding word repealed (with effect in accordance with Sch. 33 para. 4(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 4(1)(c), Sch. 43 Pt. 3(12)

F134 Words in s. 83AA(10) repealed (with effect in accordance with Sch. 33 para. 4(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 4(1)(d), Sch. 43 Pt. 3(12)

Modifications etc. (not altering text)

C33 S. 83AA modified (29.4.1996) by 1996 c. 8, s. 163, Sch. 31 para. 9(1)

[F135 83AB Treatment of surplus where there is a subsequent transfer of business from the company etc. U.K.

(1) If an amount is added to the [F136 long-term insurance] fund of a company as part of or in connection with a transfer of business to the company, or a demutualisation of the company not involving a transfer of business, and—

(a) there is a surplus for the period of account of the company for which that amount is brought into account,

(b) at any time after the transfer of business or demutualisation, there is a transfer of business from the company (the “subsequent transfer”), and

(c) at the end of the relevant period of account there remains at least some of the surplus mentioned in paragraph (a) above which cannot be applied—

F137 (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(ii) under subsection (6) of [F138 section 83AA above] , in the reduction of a loss arising to the company in an earlier period of account, or

(iii) under this section, in relation to an earlier subsequent transfer,

so much of the surplus falling within paragraph (c) above as, on a just and reasonable apportionment, is referable to business which is the subject of the subsequent transfer shall be applied under this section.

(2) An amount of surplus which is to be applied under this section shall be so applied by being treated as an amount of surplus (additional to any other amounts of surplus) for the period of account of the transferee company which last precedes the period of account of that company in which the subsequent transfer is effected, whether or not there is in fact any such preceding period of account.

(3) If, in a case where an amount is treated under subsection (2) above as an amount of surplus for a period of account of a company, the period is not one for which there is brought into account an amount added to the company’s [F136 long-term insurance] fund in connection with the subsequent transfer, subsection (1) above shall have effect in relation to any transfer of business from the company subsequent to that transfer as if an amount had been so added and had been brought into account for that period.

(4) Any question as to what is a just and reasonable apportionment in any case for the purposes of subsection (1) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but any person affected by the apportionment shall be entitled to appear and be heard or make representations in writing.

(5) A surplus in respect of an earlier period of account shall be applied under this section before a surplus in respect of a later period of account.

(6) All such adjustments to the liability to tax of any person shall be made, whether by assessment or otherwise, as may be required to give effect to this section.

(7) In this section—

• “ add ” has the same meaning as in section 83 above;

  “ demutualisation ” has the same meaning as in section 83 above;

  “ the relevant period of account ” means the period of account of the company from which the subsequent transfer is effected which consists of or includes the accounting period of that company which—

(a) ends with the day on which the subsequent transfer is effected; or

(b) if the subsequent transfer is a transfer of business falling within section 83(6)(c) above and no accounting period of the company ends on that day, ends next after that day;

• “ surplus ” has the same meaning as in section 83AA above;

• “ transfer of business ” has the same meaning as in section 83(3) above;

• “ transferee company ” means the company to which the subsequent transfer of business is effected.

(8) Where it is necessary for any purpose of this section to identify the time at which a demutualisation of a company takes place, that time shall be taken to be the time when the company first issues shares.

(9) A transfer of business falling within section 83(6)(c) above shall be treated for the purposes of this section as a transfer of business from the company which is the reinsured under the contract of reinsurance to the company which is the reinsurer under that contract.]

Textual Amendments

F135 SS. 83AA, 83AB inserted (29.4.1996 with effect as mentioned in Sch. 31 paras. 9(1), 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 5

F136 Words in s. 83AB(1)(3) substituted (1.12.2001) by S.I. 2001/3629, art. 60(1)(c)

F137 S. 83AB(1)(c)(i) repealed (with effect in accordance with Sch. 33 para. 5(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 5(1)(a), Sch. 43 Pt. 3(12)

F138 Words in s. 83AB(1)(c)(ii) substituted (with effect in accordance with Sch. 33 para. 5(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 5(1)(b)

Modifications etc. (not altering text)

C34 S. 83AB modified (29.4.1996) by 1996 c. 8, s. 163, Sch. 31 para. 9(1)

84 Interpretation of sections 85 to 89 and further provisions about insurance companies. U.K.

F139 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Any reference in [F140 sections 85 to 89 below] or the following provisions of this section to a straddling period is a reference to an accounting period which begins before 1st January 1990 and ends on or after that date.

(3) For the purposes of [F141 sections 85 to 89 below] and for the purposes of subsection (5)(b) below it shall be assumed that a straddling period consists of two separate accounting periods—

(a) the first beginning at the beginning of the straddling period and ending on 31st December 1989; and

(b) the second beginning on 1st January 1990 and ending at the end of the straddling period;

and in those sections and subsection (5)(b) below the first of those two notional accounting periods is referred to as “the 1989 component period” and the second is referred to as “the 1990 component period”.

(4) Chapter I of Part XII of the Taxes Act 1988 (insurance companies) shall have effect subject to the amendments in Schedule 8 to this Act, being—

(a) amendments relating to franked investment income, loss relief and group relief; and

(b) amendments consequential on or supplemental to sections 82 and 83 above and sections 85 to 89 below.

(5) Subject to subsection (6) below, in Schedule 8 to this Act,—

(a) paragraphs 2 and 6 shall be deemed to have come into force on 14th March1989; and

(b) the remainder shall have effect with respect to accounting periods beginning on or after 1st January 1990 (including the 1990 component period).

(6) Nothing in subsection (5) above affects the operation, by virtue of any provision of sections 82 and 83 above and sections 85 to 89 below, of any enactment repealed or amended by Schedule 8 to this Act and, so long as the provisions of that Schedule do not have effect in relation to sections 434 and435 of the Taxes Act 1988, nothing in subsection (5)(a) above affects the continuing operation of section 433 of that Act for the purpose only of determining the fraction of the profits referred to in subsection (6) of section 434 and subsection (1)(b) of section 435.

Textual Amendments

F139 S. 84(1) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F140 Words in s. 84(2) substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 30

F141 Words in s. 84(3) substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 30

85 Charge of certain receipts of basic life assurance business. U.K.

(1) Subject to subsection (2) below, where the profits of an insurance company in respect of its life assurance business are not charged under Case I of Schedule D, there shall be chargeable under Case VI of that Schedule any receipts referable to the company’s [F142 basic life assurance and general annuity business]—

(a) which, if those profits were charged under Case I of Schedule D, would betaken into account in computing those profits; and

(b) which would not be within the charge to tax (except under Case I of Schedule D) apart from this section;

and for the purposes of paragraph (a) above, the provisions of section 83 above as to the manner in which any item is to be taken into account shall be disregarded.

(2) The receipts referred to in subsection (1) above do not include—

(a) any premium; F143 ...

(b) any sum received by virtue of a claim under an insurance contract(including a re-insurance contract); or

F144 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F144 (ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F144 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) any sum which is not within the charge to tax (except under Case I of Schedule D) because of an exemption from tax.

[F145 (2A) Receipts falling within subsection (1) above are to be taken into account for the purposes of corporation tax when they are brought into account.

Subsection (6) of section 89 (meaning of “brought into account”) shall also apply for the purposes of this section.

(2B) Expenses fall to be deducted from receipts falling within subsection (1) above in accordance with the provisions of the Corporation Tax Acts applicable to Case VI of Schedule D.

(2C) For the purposes of subsection (1) above, a receipt is referable to basic life assurance and general annuity business if—

(a) in the case of a repayment or refund of acquisition expenses, the acquisition expenses fell within section 86 below,

(b) in the case of a reinsurance commission, the policy or contract reinsured under the arrangement in respect of which the commission is paid constitutes basic life assurance and general annuity business, and

(c) in any other case, it is income which, if it were income from an asset, would by virtue of section 432A of the Taxes Act 1988 (apportionment of insurance companies' income) be referable to basic life assurance and general annuity business.]

(3) This section has effect with respect to the receipts of accounting periods beginning on or after 1st January 1990 (including the 1990 component period).

Textual Amendments

F142 Words in s. 85(1) substituted(for accounting periods beginning on or after 01.01.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras.12, 18.

F143 Word in s. 85(2)(a) repealed (with effect in accordance with s. 42 of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(3)

F144 S. 85(2)(c)-(d) repealed (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 7(2), Sch. 42 Pt. 2(3)

F145 S. 85(2A)-(2C) inserted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 7(3)

Modifications etc. (not altering text)

C35 S. 85(1) modified (retrospective to 1.1.1995) by S.I. 1997/473, regs. 1(2), 38

86 Spreading of relief for acquisition expenses. U.K.

[F146 (1) For the purposes of this section, the acquisition expenses for any period of an insurance company carrying on life assurance business are such of the following as for that period fall to be included at Step 1 in section 76(7) of the Taxes Act 1988 (expenses of insurance companies)—

(a) commissions (however described), other than commissions for persons who collect premiums from house to house,

(b) any other expenses payable solely for the purpose of the acquisition of business,

(c) so much of any other expenses payable partly for the purpose of the acquisition of business and partly for other purposes as are properly attributable to the acquisition of business,

reduced by the appropriate portion of the adjusted loss deduction (if any) for the purposes of Step 5 for the period.

The appropriate portion of the adjusted loss deduction is the amount which bears to the whole of that deduction the proportion which UAE bears to S1, where—

UAE is the amount of the acquisition expenses, before making the reduction required by this subsection; and

S1 is the sum of the amounts described in paragraphs (a) and (b) in Step 4.]

(2) The exclusion from paragraph (a) of subsection (1) above of commissions [F147 for persons who collect premiums from house to house] shall not prevent such commissions constituting [F148 expenses payable] for the purposes of paragraph(b) or paragraph (c) of that subsection.

(3) Nothing in subsections (1) and (2) above applies to commissions (however described) in respect of insurances made before 14th March 1989, but without prejudice to the application of those subsections to any commission attributable to a variation on or after that date in a policy issued in respect of an insurance made before that date; and, for this purpose, the exercise of any rights conferred by a policy shall be regarded as a variation of it.

F149 [( 3A ) Nothing in subsection (1), (2) or (3) above applies to commissions (however described) in respect of annuity contracts made in accounting periods beginning before 1st January 1992, but without prejudice to the application of subsections (1) and (2) above to any commission attributable to a variation, in an accounting period beginning on or after that date, of an annuity contract so made; and for this purpose the exercise of any rights conferred by an annuity contract shall be regarded as a variation of it.]

(4) In subsection (1) above “the acquisition of business” includes

F150 [( a )] the securing on or after 14th March 1989 of the payment of increased or additional premiums in respect of a policy of insurance issued in respect of an insurance already made (whether before, on or after that date) [F151 and

(b) the securing, in an accounting period beginning on or after 1st January 1992, of the payment of increased or additional consideration in respect of an annuity contract already made (whether in an accounting period beginning before, or on or after, that date)].

F152 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F153 (5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F154 (6) Only a portion of the acquisition expenses for any accounting period (in this section referred to as “the base period”) is to be relieved under section 76 of the Taxes Act 1988 for that period.

That portion is one-seventh of the adjusted amount of the acquisition expenses for the period.

For the purposes of this section the adjusted amount of the acquisition expenses for the period is so much of those expenses as remains after—

(a) including the whole of those expenses at Step 1,

(b) making any reduction in those expenses which is required at Step 2, and

(c) deducting any amount of reinsurance commission or any repayment or refund (in whole or in part) that falls for the period to be charged to tax under section 85 above,

Effect is given to this subsection at Step 6 (which requires the deduction of six-sevenths of the adjusted amount of the acquisition expenses for the period).]

F155 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F156 (8) This subsection applies in any case where, in accordance with subsection (6) above, only a fraction of the adjusted amount of the acquisition expenses for the base period is to be relieved under section 76 of the Taxes Act 1988 for that period.

In any such case—

(a) a further fraction of the adjusted amount of those expenses is to be relieved under that section for each succeeding accounting period after the base period, until the whole of the adjusted amount has been relieved,

(b) the fraction is one-seventh, except that for any accounting period of less than a year the fraction is to be proportionately reduced, and

(c) the relief is given by including that fraction of the adjusted amount at paragraph (b) of Step 8,

but this is subject to subsection (9) below.

(9) For any accounting period for which—

(a) the fraction of the adjusted amount of the acquisition expenses for the base period which would otherwise fall to be relieved in accordance with subsection (8) above, exceeds

(b) the balance of that adjusted amount which has not been so relieved for earlier accounting periods,

only that balance shall be so relieved.]

[F157 (9A) In this section “expenses payable” has the same meaning as in Step 1.

(9B) Any reference in this section to a numbered Step is a reference to the Step so numbered in section 76(7) of the Taxes Act 1988.]

(10) This section has effect for accounting periods beginning on or after 1st January 1990 (including the 1990 component period).

Textual Amendments

F146 S. 86(1) substituted for s. 86(1)-(1B) (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(2)

F147 Words in s. 86(2) substituted (29.4.1996 with effect in relation to accounting periods beginning on or after 1.1.1996) by 1996 c. 8, s. 167(3)(b)(10)

F148 Words in s. 86(2) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(3)

F149 S. 86(3A) inserted(for accounting periods beginning on or after 01.01.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 13(2), 18.

F150 S. 86(4)"(a)" inserted(for accounting periods beginning on or after 01.01.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 13(3), 18.

F151 S. 86(4)(b) and word preceding it inserted(for accounting periods beginning on or after 01.01.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 13(3), 18.

F152 S. 86(5) repealed (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(4)(a), Sch. 42 Pt. 2(3)

F153 S. 86(5A) repealed (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(4)(b), Sch. 42 Pt. 2(3)

F154 S. 86(6) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(5)

F155 S. 86(7) repealed (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(6), Sch. 42 Pt. 2(3)

F156 S. 86(8)(9) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(7)

F157 S. 86(9A)(9B) inserted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(8)

Modifications etc. (not altering text)

C36 S. 86 modified (retrospective to 1.1.1995) by S.I. 1997/473, regs. 1(2), 39

87 Management expenses. U.K.

(1) Section 76 of the Taxes Act 1988 shall be amended in accordance with subsections (2) and (3) below.

(2) In subsection (1), after paragraph (b) there shall be inserted “and

(c) there shall be deducted from the amount treated as the expenses of management for any accounting period any repayment or refund (in whole or in part) of a sum disbursed by the company (for that or any earlier period) as acquisition expenses; and

(d) the amount treated as expenses of management shall not include any amount in respect of expenses referable to general annuity business or pension business; and

(e) the amount of profits from which expenses of management may be deducted for any accounting period shall not exceed the net income and gains of that accounting period referable to basic life assurance business;

and for this purpose “net income and gains” means income and gains after deducting any reliefs or exemptions which fall to be applied before taking account of this section. ”

F158 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In consequence of the amendment made by subsection (2) above, section 436(3)(b) of the Taxes Act 1988 (no deduction of expenses of management in certain cases) shall cease to have effect.

(5) This section has effect with respect to accounting periods beginning on or after 1st January 1990; and, in relation to a straddling period, sections75, 76 and 436 of the Taxes Act 1988—

(a) shall have effect in relation to the 1989 component period without regard to the amendments made by subsections (2) to (4) above; and

(b) shall have effect in relation to the 1990 component period as amended by those subsections.

F159 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F160 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F158 S. 87(3) repealed by Finance Act 1991 (c. 31, SIF 63:1), s. 123, Sch. 19 Pt.V.

F159 S. 87(6) repealed (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 44(2)

F160 S. 87(7) repealed (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 44(2)

88 Corporation tax: policy holders’ fraction of profits. U.K.

(1) Subject to subsection (2) F161 ... below, in the case of a company carrying on life assurance business, the rate of corporation tax chargeable for any financial year on

[F162 (a) the policy holders’ share of the relevant profits for any accounting period, or

(b) where the business is mutual business, the whole of those profits,

shall] be deemed to be the rate at which income tax at the [F163 lower] rate is charged for the year of assessment which begins on 6th April in the financial year concerned.

(2) Subsection (1) above does not apply in relation to profits charged under Case I of Schedule D.

[F164 (3) For the purposes of subsection (1) above, the relevant profits of a company for an accounting period are the income and gains of the company’s life assurance business reduced by the aggregate amount of—

[F165 (aa) amounts falling in respect of any non-trading deficits on the company’s loan relationships to be brought into account in that period in accordance with paragraph 4 of Schedule 11 to the Finance Act 1996,] [F166 and

(a) the basic deduction given by Step 8 in section 76(5) of the Taxes Act 1988.]]

[F167 (3A) In subsection (3) above “income and gains of the company’s life assurance business” means the aggregate of—

(a) income and chargeable gains referable [F168 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business, and

(b) profits of the company chargeable under Case VI of Schedule D under sections 436, 439B and 441 of the Taxes Act 1988 (pension business, life reinsurance business and overseas life assurance business).

(3B) In subsection (3A)(a) above (and section 89(1B) below) “chargeable gains referable [F169 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business”, in relation to an accounting period, means the chargeable gains so far as [F170 so referable] accruing to the company in the accounting period after deducting—

(a) any allowable losses so referable accruing to the company in the accounting period, and

(b) so far as they have not been allowed as a deduction from chargeable gains in any previous accounting period, any allowable losses so referable previously accruing to the company.]

(4) In determining for the purposes of section 13 of the Taxes Act 1988 (small companies’ relief) the profits and basic profits (within the meaning of that section) of an accounting period of a company carrying on life assurance business, the policy holders’ [F171 share] of the company’s relevant profits for that period [F172 , or where the business is mutual business the whole of those profits,] shall be left out of account.

(5) This section has effect with respect to the profits of a company for accounting periods beginning on or after 1st January 1990 (including the 1990 component period); and, for this purpose, the profits of the 1990 component period shall be taken to be that portion of the profits of the straddling period which the length of the 1990 component period bears to the length of the straddling period.

Textual Amendments

F161 Words in s. 88(1) repealed (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(2)(a), Sch. 43 Pt. 3(12)

F162 Words in s. 88(1) substituted (and deemed always to have had effect) by Finance Act 1990 (c. 29), s. 45(1)(10)

F163 Word in s. 88(1) substituted (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(2)(b)

F164 S. 88(3) substituted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 21(2) (with Sch. 8 paras. 55(2), 57(1))

F165 S. 88(3)(aa) inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 56 (with savings in Ch. II, ss. 80-105 of Pt. IV)

F166 Words in s. 88(3) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 45(2)

F167 S. 88(3A)(3B) inserted (with effect in accordance with Sch. 33 para. 6(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(1)

F168 Words in s. 88(3A)(a) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(a)

F169 Words in s. 88(3B) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(b)

F170 Words in s. 88(3B) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)

F171 Word in s. 88(4) substituted (and deemed always to have had effect) by Finance Act 1990 (c. 29), s. 45(2)(10)

F172 Words in s. 88(4) inserted (and deemed always to have had effect) by Finance Act 1990 (c. 29), s. 45(2)(10)

Modifications etc. (not altering text)

C37 S. 88(3A)(a) modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/437), reg. 39A (as inserted (8.4.2004) by S.I. 2004/822, regs. 1, 33)

F173 88A Lower corporation tax rate on certain insurance company profits. U.K.

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

Textual Amendments

F173 S. 88A repealed (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(3), Sch. 43 Pt. 3(12)

[F174 89 Policy holders’ share of profits. U.K.

(1) The references in [F175 section 88] above to the policy holders’ share of the relevant profits for an accounting period of a company carrying on life assurance business F176 ... are references to —

[F177 (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.]

[F178 (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 [F179 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business reduced by the aggregate amount of—

[F180 (a) amounts falling in respect of any non-trading deficits on the company’s loan relationships to be brought into account in that period in accordance with paragraph 4 of Schedule 11 to the Finance Act 1996, and

(b) the basic deduction given by Step 8 in section 76(7) of the Taxes Act 1988.]]

(2) For the purposes of [F181 subsections (1) and (1A)] above, the Case I profits for a period shall be reduced by—

F182 ( a ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the shareholders’ share of any F183 ... [F184 distributions received from companies resident in the United Kingdom in the period which are] [F185 referable [F186 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business][F187 , and

(c) the shareholders’ share of any foreign income dividends arising to the company in the period [F188 which are referable to the company’s basic life assurance and general annuity business].]

[F189 (2A) For the purposes of subsection (2) above—

(a) “ foreign income dividends ” shall be construed in accordance with Chapter VA of Part VI;

(b) the shareholders’ share of any foreign income dividends is so much of the income they represent as is the shareholders’ share.]

(3) For the purposes of those section “ the shareholders’ share ” in relation to any income is so much of the income as is represented by the fraction

where—

• A is an amount equal to the Case I profits of the company for the period in question in respect of its life assurance business, and

• B is an amount equal to the excess of the company’s relevant non-premium income and relevant gains over its relevant expenses and relevant interest for the period.

(4) Where there is no such excess as is mentioned in subsection (3) above, or where the Case I profits are greater than any excess, the whole of the income shall be the shareholders’ share; and (subject to that) where there are no Case I profits, none of the income shall be the shareholders’ share.

(5) In subsection (3) above the references to the relevant non-premium income, relevant gains, relevant expenses and relevant interest of a company for an accounting period are references respectively to the following items as brought into account for the period, so far as referable to the company’s life assurance business,—

(a) the company’s investment income from the assets of its long-term [F190 insurance] fund together with its other income, apart from premiums;

(b) any increase in the value (whether realised or not) of those assets;

(c) expenses payable by the company;

(d) interest payable by the company;

and if for any period there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of the period.

(6) Except in so far as regulations made by the Treasury otherwise provide, in this section “ brought into account ” means brought into account in the revenue account prepared for the purposes of [F191 Chapter 9 of the Prudential Sourcebook (Insurers)]; and where the company’s period of account does not coincide with the accounting period, any reference to an amount brought into account for the accounting period is a reference to the corresponding amount brought into account for the period of account in which the accounting period is comprised, proportionately reduced to reflect the length of the accounting period as compared with the length of the period of account.

[F192 (7) In this section—

• “Case I profits” means profits computed in accordance with the provisions of the Taxes Act 1988 applicable to Case I of Schedule D [F193 and adjusted in respect of losses in accordance with [F194 the second sentence of section 76(10)] of the Taxes Act 1988;]

• F195 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

F196 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F174 S. 89 substituted retrospectively by Finance Act 1990 (c. 29) {s. 45(3)}

F175 Words in s. 89(1) substituted (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(4)(a)

F176 Words in s. 89(1) repealed (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(4)(b), Sch. 43 Pt. 3(12)

F177 S. 89(1)(a)(b) substituted (with effect in accordance with Sch. 33 para. 6(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(3)

F178 S. 89(1A)(1B) inserted (with effect in accordance with Sch. 33 para. 6(11)(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(4)

F179 Words in s. 89(1B) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(c)

F180 Words in s. 89(1B) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 46(2)

F181 Words in s. 89(2) substituted (with effect in accordance with Sch. 33 para. 13(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(5)

F182 S. 89(2)(a) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 23, 52, Sch. 3 para. 14(2)(a)(4), Sch. 8 Pt. II(6), note

F183 Words in s. 89(2)(b) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 23, 52, Sch. 3 para. 14(2)(b)(i)(4), Sch. 8 Pt. II(6), note

F184 Words in s. 89(2)(b) substituted (with effect in accordance with Sch. 33 para. 12(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 12(4)

F185 Words in s. 89(2)(b) substituted (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, s. 23, Sch. 3 para. 14(2)(b)(ii)(4)

F186 Words in s. 89(2)(b) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(d)

F187 S. 89(2)(c) and word immediately preceding it repealed (31.7.1997 with effect in relation to distributions made on or after 6.4.1999) by 1997 c. 58, ss. 36, 52, Sch. 6 para. 19(2)(4), Sch. 8 Pt. II(11), note

F188 Words in s. 89(2)(c) substituted (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, s. 23, Sch. 3 para. 14(2)(c)(4)

F189 S. 89(2A) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 36, 52, Sch. 6 para. 19(3)(4), Sch. 8 Pt. II(11), note

F190 Word in s. 89(5)(a) substituted (1.12.2001) by S.I. 2001/3629, art. 60(3)

F191 Words in s. 89(6) substituted (1.12.2001) by S.I. 2001/3629, art. 58(2)

F192 S. 89(7) substituted (1.12.2001) by S.I. 2001/3629, art. 58(3)

F193 Words in s. 89(7) inserted (with effect in accordance with Sch. 33 para. 7(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 7(1)

F194 Words in s. 89(7) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 46(3)

F195 Words in s. 89(7) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F196 S. 89(8) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 23, 52, Sch. 3 para. 14(3)(4), Sch. 8 Pt. 2(6) Note

Modifications etc. (not altering text)

C38 S. 89 amended (27.7.1993 with application as mentioned in s. 78(11) of the amending Act) by 1993 c. 34, s. 78(6)(11)

C39 S. 89(1B) applied (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 6(11)

C40 S. 89(1B) modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/437), reg. 40A(1) (as inserted (8.4.2004) by S.I. 2004/822, regs. 1, 35)

[F197 89A Modification of sections [F198 82 to 83A, 88] and 89 in relation to overseas life insurance companies. U.K.

Schedule 8A to this Act (which makes modifications of sections [F199 82 to 83A, 88] and 89 in relation to overseas life insurance companies) shall have effect.]

Textual Amendments

F197 S. 89A inserted (27.7.1993) by 1993 c. 34, s. 101(1)

F198 Words in s. 89A heading substituted (with effect in accordance with reg. 1 of the amending S.I.) by The Overseas Life Insurance Companies Regulations 2004 (S.I. 2004/2200), regs. 1(1), 5(1)

F199 Words in s. 89A substituted (with effect in accordance with reg. 1 of the amending S.I.) by The Overseas Life Insurance Companies Regulations 2004 (S.I. 2004/2200), regs. 1(1), 5(2)

90 Life policies etc. held by companies. U.K.

Schedule 9 to this Act (which imposes tax on certain benefits relating to life policies, life annuities and capital redemption policies held by companies, and makes related provision) shall have effect.

[F200 90A Interpretation U.K.

Expressions used in any of sections 82 to 90 above (or Schedule 8A to this Act) and in Chapter 1 of Part 12 of the Taxes Act 1988 have the same meaning in those sections (or that Schedule) as in that Chapter.]

Textual Amendments

F200 S. 90A inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 31

Underwriters U.K.

91 Premiums trust funds: stock lending. U.K.

(1) In section 725 of the Taxes Act 1988 (Lloyd’s underwriters) the following subsections shall be inserted after subsection (9)—

“(10) Subsection (11) below applies where the following state of affairs exists at the beginning of 1st January of any year or the end of 31st December of any year—

(a) securities have been transferred by the trustees of a premiums trust fund in pursuance of an arrangement mentioned in section 129(1) or (2),

(b) the transfer was made to enable another person to fulfil a contract or to make a transfer,

(c) securities have not been transferred in return, and

(d) section 129(3) applies to the transfer made by the trustees.

(11) The securities transferred by the trustees shall be treated for the purposes of subsections (1) to (6) above as if they formed part of the premiums trust fund at the beginning of 1st January concerned or the end of 31st December concerned (as the case may be).”

F201 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) This section applies where the transfer by the trustees of a premiums trust fund is made after the date specified as mentioned in section 129(6) of the Taxes Act 1988.

Textual Amendments

F201 s. 91(2) repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

92 Regulations about underwriters etc. U.K.

(1) In section 451(1A) of the Taxes Act 1988 (regulations about underwriters)for the words from “with respect to” to the end there shall be substituted the words “with respect to any year or years of assessment; and the year (or any of the years) may be the one in which the regulations are made or any year falling before or after that year.”

(2) The following subsection shall be inserted after section 451(1A) of that Act—

“(1B) But the regulations may not make provision with respect to any year of assessment which precedes the next but one preceding the year of assessment in which the regulations are made.”

F202 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F203 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F203 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F203 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F203 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F202 S. 92(3) repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F203 S. 92(4)-(7) repealed (27.7.1993 with effect for the year 1992-93 and subsequent years of assessment) by 1993 c. 34, s. 213, Sch. 23 Pt. III(12) Note 5

Securities U.K.

F204 93 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F204 S. 93 repealed (29.4.1996 with effect as mentioned in s. 105(1) of the amending Act) by 1996 c. 8, s. 205, Sch. 41 Pt. V(3), note

F205 94 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F205 S. 94 repealed (29.4.1996 with effect as mentioned in s. 105(1) of the amending Act) by 1996 c. 8, s. 205, Sch. 41 Pt. V(3), note

F206 95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F206 S. 95 repealed (29.4.1996 with effect as mentioned in s. 105(1) of the amending Act) by 1996 c. 8, s. 205, Sch. 41 Pt. V(3), note

96 Securities: miscellaneous. U.K.

(1) In section 452(8) of the Taxes Act 1988 (special reserve funds) for the words from “In paragraph (a) above” to the end there shall be substituted— “In paragraph (a) above “income” includes—

(a) annual profits or gains chargeable to tax by virtue of section 714(2) or716(3),

(b) amounts treated as income chargeable to tax by virtue of paragraph 4 of Schedule 4, and

(c) amounts treated as income chargeable to tax by virtue of paragraph 5 of Schedule 11 to the Finance Act 1989.”

(2) In section 687 of the Taxes Act 1988 (payments under discretionary trusts)the following shall be inserted after subsection (3)(g)—

“(h) the amount of any tax on an amount which is treated as income of the trustees by virtue of paragraph 4 of Schedule 4 and is charged to tax at a rate equal to the sum of the basic rate and the additional rate by virtue of paragraph 17 of that Schedule;

(i) the amount of any tax on an amount which is treated as income of the trustees by virtue of paragraph 5 of Schedule 11 to the Finance Act 1989 and is charged to tax at a rate equal to the sum of the basic rate and the additional rate by virtue of paragraph 11 of that Schedule;”.

F207 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The new paragraphs (b) and (c) inserted by subsection (1) above, and subsection (2) above, shall apply—

(a) in the case of a deep discount security, where there is a disposal (within the meaning of Schedule 4 to the Taxes Act 1988) on or after 14th March 1989;

(b) in the case of a deep gain security, where there is a transfer within the meaning of Schedule 11 to this Act, or a redemption, on or after 14th March1989.

Textual Amendments

F207 S. 96(3) repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

Groups of companies U.K.

[F208 97 Set-off of ACT where companies remain in the same group. U.K.

(1) In section 240 of the Taxes Act 1988 (set-off of company’s ACT against subsidiary’s liability to corporation tax) at the end of subsection (5)(set-off not to be made against subsidiary’s liability to corporation tax for any accounting period in which, or in any part of which, it was not a subsidiary of the surrendering company) there shall be added the words “unless throughout that period or part both companies were subsidiaries of a third company”.

(2) This section shall have effect in relation to accounting periods ending on or after 14th March 1989.]

Textual Amendments

F208 S. 97 repealed (31.7.1998 with effect in accordance with Sch. 3 of the amending Act) by 1998 c. 36, s. 165, Sch. 27 Pt. III(2), note

[F209 98 Restriction on set-off of ACT. U.K.

(1) After section 245 of the Taxes Act 1988 there shall be inserted—

245A “ Restriction on application of section 240 in certain circumstances.

(1) This section applies if—

(a) there is a change in the ownership of a company (“the relevant company”);

(b) by virtue of section 240 the relevant company is treated as having paid an amount of advance corporation tax in respect of a distribution made by it at any time before the change; and

(c) within the period of six years beginning three years before the change, there is a major change in the nature or conduct of a trade or business of the company which is for the purposes of section 240 the surrendering company in relation to that amount.

(2) No advance corporation tax which the relevant company is treated by virtue of section 240 as having paid in respect of a distribution made by it in anaccounting period beginning before the change of ownership shall be treatedunder section 239(4) as paid by it in respect of distributions made in an accounting period ending after the change of ownership; and this subsection shall apply to an accounting period in which the change of ownership occurs as if the part ending with the change of ownership, and the part after, were two separate accounting periods.

(3) Subsections (4) and (5) of section 245 shall apply also for the purposes of this section and as if the reference in subsection (4) of section 245 to the period of three years mentioned in subsection (1)(a) of that section were a reference to the period mentioned in subsection (1)(c) above.

(4) Sections 768(8) and (9) and 769 shall apply also for the purposes of this section and as if in subsection (3) of section 769 the reference to the benefit of losses were a reference to the benefit of advance corporation tax.

245B Restriction on set-off where asset transferred after change in ownership of company.

(1) Subsection (4) below applies if—

(a) there is a change in the ownership of a company (“the relevant company”);

(b) any advance corporation tax paid by the relevant company in respect of distributions made by it in an accounting period beginning before the change is treated under section 239(4) as paid by it in respect of distributions made by it in an accounting period ending after the change;

(c) after the change the relevant company acquires an asset from another company in such circumstances that section 273(1) of the Taxes Act 1970applies to the acquisition; and

(d) a chargeable gain accrues to the relevant company on the disposal of the asset within the period of three years beginning with the change of ownership.

(2) Subsection (1)(b) above shall apply to an accounting period in which the change of ownership occurs as if the part ending with the change of ownership, and the part after, were two separate accounting periods.

(3) For the purposes of subsection (1)(d) above an asset acquired by the relevant company as mentioned in subsection (1)(c) above shall be treated as the same as an asset owned at a later time by that company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold, and the first asset was a leasehold and the lessee has acquired the reversion.

(4) In relation to the accounting period in which the chargeable gain accrues to the relevant company (“the relevant period”), section 239 shall have effect as if the limit imposed by subsection (2) of that section on the amount of advance corporation tax to be set against the relevant company’s liability to corporation tax were reduced by whichever is the lesser of—

(a) the amount of advance corporation tax that would have been payable (apart from section 241) in respect of a distribution made at the end of the relevant period of an amount which, together with the advance corporation tax so payable in respect of it, is equal to the chargeable gain, and

(b) the amount of surplus advance corporation tax in relation to the accounting period which by virtue of subsection (2) above is treated for the purposes of subsection (1)(b) above as ending with the change of ownership.

(5) Sections 768(8) and (9) and 769 shall apply also for the purposes of this section and as if in subsection (3) of section 769 the reference to the benefit of losses were a reference to the benefit of advance corporation tax.”

(2) This section shall have effect where the change in the ownership of the relevant company occurs on or after 14th March 1989.]

Textual Amendments

F209 S. 98 repealed (31.7.1998 with effect in accordance with Sch. 3 of the amending Act) by 1998 c. 36, s. 165, Sch. 27 Pt. III(2), note

F210 99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F210 S. 99 repealed (11.5.2001 with application as mentioned in Sch. 33 Pt. 2(10) of the amending Act) by 2001 c. 9, s. 110, Sch. 33 Pt. 2(10), note

100 Change in ownership of company. U.K.

(1) Section 769 of the Taxes Act 1988 (which contains rules for determining whether for the purposes of sections 245 and 768 of that Act there is a change in the ownership of a company) shall be amended in accordance with this section.

(2) For subsection (6) there shall be substituted—

“(6) If there is a change in the ownership of a company, including a change occurring by virtue of the application of this subsection but not a change which is to be disregarded under subsection (5) above, then—

(a) in a case falling within subsection (1)(a) above, the person mentioned in subsection (1)(a) shall be taken for the purposes of this section to acquire at the time of the change any relevant assets owned by the company;

(b) in a case falling within subsection (1)(b) above but not within subsection(1)(a) above, each of the persons mentioned in subsection (1)(b) shall be taken for the purposes of this section to acquire at the time of the change the appropriate proportion of any relevant assets owned by the company; and

(c) in any other case, each of the persons mentioned in paragraph (c) of subsection (1) above (other than any whose holding is disregarded under that paragraph) shall be taken for the purposes of this section to acquire at the time of the change the appropriate proportion of any relevant assets owned by the company.

(6A) In subsection (6) above—

• “the appropriate proportion”, in relation to one of two or more persons mentioned in subsection (1)(b) or (c) above, means a proportion corresponding to the proportion which the percentage of the ordinary share capital acquired by him bears to the percentage of that capital acquired by all those persons taken together; and

• “relevant assets”, in relation to a company, means—

  (a)

  any ordinary share capital of another company, and

  (b)

  any property or rights which under subsection (3) above may be taken into account instead of ordinary share capital of another company.

(6B) Notwithstanding that at any time a company (“the subsidiary company”) is a 75 per cent. subsidiary of another company (“theparent company”) it shall not be treated at that time as such a subsidiary for the purposes of this section unless, additionally, at that time—

(a) the parent company would be beneficially entitled to not less than 75 percent. of any profits available for distribution to equity holders of the subsidiary company; and

(b) the parent company would be beneficially entitled to not less than 75 percent. of any assets of the subsidiary company available for distribution to its equity holders on a winding-up.

(6C) Schedule 18 shall apply for the purposes of subsection (6B) above as it applies for the purposes of section 413(7).”

(3) Subsection (7)(b) and (c) shall cease to have effect.

(4) This section shall have effect where the change of ownership of a company would be treated as occurring on or after 14th March 1989.

101 Treatment of convertible shares or securities for purposes relating togroup relief etc. U.K.

(1) Paragraph 1 of Schedule 18 to the Taxes Act 1988 (which containsdefinitions relating to group relief) shall be amended in accordance with thissection.

(2) For sub-paragraph (3)(b) there shall be substituted—

“(b) do not carry any right either to conversion into shares or securities ofany other description except—

(i) shares to which sub-paragraph (5A) below applies,

(ii) securities to which sub-paragraph (5B) below applies, or

(iii) shares or securities in the company’s quoted parent company,

or to the acquisition of any additional shares or securities;”.

(3) For sub-paragraph (5)(a) there shall be substituted—

“(a) which does not carry any right either to conversion into shares orsecurities of any other description except—

(i) shares to which sub-paragraph (5A) below applies,

(ii) securities to which sub-paragraph (5B) below applies, or

(iii) shares or securities in the company’s quoted parent company,

or to the acquisition of any additional shares or securities;”.

(4) After sub-paragraph (5) there shall be inserted—

“(5A) This sub-paragraph applies to any shares which—

(a) satisfy the requirements of sub-paragraph (3)(a), (c) and (d) above, and

(b) do not carry any rights either to conversion into shares or securities ofany other description, except shares or securities in the company’s quotedparent company, or to the acquisition of any additional shares or securities.

(5B) This sub-paragraph applies to any securities representing a loan of orincluding new consideration and—

(a) which satisfies the requirements of sub-paragraph (5)(b) and (c) above,and

(b) which does not carry any such rights as are mentioned in sub-paragraph(5A)(b) above.

(5C) For the purposes of sub-paragraphs (3) and (5) to (5B) above a company(“the parent company”) is another company’s “quotedparent company” if and only if—

(a) the other company is a 75 per cent. subsidiary of the parent company,

(b) the parent company is not a 75 per cent. subsidiary of any company, and

(c) the parent company’s ordinary shares (or, if its ordinary share capitalis divided into two or more classes, its ordinary shares of each class) arequoted on a recognised stock exchange or dealt in on the Unlisted SecuritiesMarket;

and in this sub-paragraph “ordinary shares” means sharesforming part of ordinary share capital.

(5D) In the application of sub-paragraphs (3) and (5) to (5B) above indetermining for the purposes of sub-paragraph (5C)(a) above who are the equityholders of the other company (and, accordingly, whether section 413(7)prevents the other company from being treated as a 75 per cent. subsidiary ofthe parent company for the purposes of sub-paragraph (5C)(a)), it shall beassumed that the parent company is for the purposes of sub-paragraphs (3) and(5) to (5B) above the other company’s quoted parent company.”

(5) In sub-paragraph (6) for the words “to (5)” there shall besubstituted the words “to (5D)”.

(6) This section, so far as relating to Schedule 18 of the Taxes Act 1988 inits application (by virtue of section 138 below) for the purposes ofsubsections (1D) and (1E) of section 272 of the Taxes Act 1970, shall bedeemed to have come into force on 14th March 1989.

102 Surrender of company tax refund etc. within group. U.K.

(1) Subsection (2) below applies where—

(a) there falls to be made to a company (“the surrendering company”)which is a member of a group throughout the appropriate period a tax refundrelating to an accounting period of the company (“the relevant accountingperiod”), and

(b) another company (“the recipient company”) which is a member of thesame group throughout the appropriate period also has the relevant accountingperiod as an accounting period.

(2) Where this subsection applies the two companies may, at any time beforethe refund is made to the surrendering company, jointly give notice to theinspector in such form as the Board may require that subsection (4) below isto have effect in relation to the refund or to any part of the refundspecified in the notice.

(3) In subsection (1) above—

• “appropriate period” means the period beginning with therelevant accounting period and ending on the day on which the notice undersubsection (2) above is given, and

• “tax refund relating to an accounting period” means, inrelation to a company—

(a) a repayment of corporation tax paid by the company for the period,

(b) a repayment of income tax in respect of a payment received by the companyin the period, or

(c) a payment of the whole or part of the tax credit comprised in any frankedinvestment income received by the company in the period.

(4) Subject to subsection (6) below, where this subsection has effect inrelation to any refund or part of a refund—

(a) the recipient company shall be treated for all purposes of the Tax Actsas having paid on the relevant date an amount of corporation tax for therelevant accounting period equal to the amount of the refund or part, and

(b) there shall be treated for all those purposes as having been made to thesurrendering company on the relevant date a repayment of corporation tax orincome tax or a payment of tax credit (as the case may be) equal to the amountof the refund or part;

and where the refund is a repayment of corporation tax, any interestrelating to it which has been paid by the surrendering company shall betreated as having been paid by the recipient company.

[F211 (4A) Where subsection (4) above has effect in relation to any amount and there is, by virtue of any of subsections (7) to [F212 (7CA)] of section 826 of the Taxes Act 1988, a period for which the whole or any part of that amount would not, had the refund been made to the surrendering company, have carried interest under that section, that period shall be treated as excluded—

(a) from any period for which any refund made by virtue of subsection (4) above to the recipient company in respect of some or all of that amount or, as the case may be, that part of it is to carry interest under that section; and

(b) from any period for which a sum representing some or all of that amount or part would (apart from this subsection) be treated by virtue of subsection (4) above as not carrying interest under section 87A of the M6 Taxes Management Act 1970;

and in determining for the purposes of this subsection which part of any amount is applied in discharging a liability of the recipient company to pay any corporation tax and which part is represented by a refund to the recipient company, it shall be assumed that the part in relation to which there is a period which would not have carried interest under section 826 of the Taxes Act 1988 is applied in preference to any other part of that amount in or towards discharging the liability.]

(5) In subsection (4) above “relevant date”, in relation toa refund, means—

(a) in so far as it consists of a repayment of corporation tax paid by thesurrendering company after the date on which it became due and payable under [F213 section 59D or 59E of the Taxes Management Act 1970], the day on which it was paid by thatcompany, and

(b) otherwise, the date on which corporation tax for the relevant accountingperiod became due and payable.

(6) For the purpose of ascertaining the amount of any penalty to which therecipient company is liable under [F214 paragraph 18 of the Taxes Management Act 1970], the corporation tax which the company istreated as having paid by subsection (4)(a) above shall be treated as paid onthe day on which the notice under subsection (2) above is given (and not onthe relevant date).

(7) A payment for a transferred tax refund—

(a) shall not be taken into account in computing profits or losses of eithercompany for corporation tax purposes, and

(b) shall not for any of the purposes of the Corporation Tax Acts be regardedas a distribution or a charge on income;

and in this subsection “a payment for a transferred taxrefund” means a payment made by the receiving company to thesurrendering company in pursuance of an agreement between them as respects thegiving of a notice under this section, being a payment not exceeding theamount of the refund in question.

(8) For the purposes of this section two companies are members of the samegroup if and only if they would be for the purposes of Chapter IV of Part Xof the Taxes Act 1988.

(9) This section shall not apply unless the relevant accounting period endsafter such day, not being earlier than 31st March 1992, as the Treasury mayby order made by statutory instrument appoint.

Textual Amendments

F211 S. 102(4A) inserted (27.7.1993) by 1993 c. 34, s. 120, Sch. 14 para. 11

F212 Words in s. 102(4A) substituted (1.5.1995) by 1995 c. 4, s. 130, Sch. 24 Pt. II para. 12(3)

F213 Words in s. 102(5)(a) substituted (27.7.199 with effect in relation to accounting periods ending on or after 1.7.1999) by 1999 c. 16, s. 89(2)(3)

F214 Words in s. 102(6) substituted (27.7.1999 with effect in relation to accounting periods ending on or after 1.7.1999) by 1999 c. 16, s. 93(1)(2), Sch. 11 para. 3

Modifications etc. (not altering text)

C41 S. 102 applied (with modifications) (7.1.1999) by S.I. 1998/3175, reg. 9(1)

Marginal Citations

M6 1970 c. 9.

Close companies U.K.

103 Repeal of apportionment provisions. U.K.

(1) Except as provided by subsection (2) below, Chapter III of Part XI of theTaxes Act 1988 (apportionment of undistributed income etc. of close companies)shall not have effect in relation to accounting periods beginning after 31stMarch 1989.

(2) Section 427(4) of the Taxes Act 1988 (which gives relief to an individualwhere income apportioned to him in an earlier accounting period of a closecompany is included in a distribution received by him in a later accountingperiod), and section 427(5) of, and Part I of Schedule 19 to, that Act so faras they relate to section 427(4), shall continue to have effect in any casewhere the subsequent distribution referred to in section 427(4) is made before1st April 1992.

104 Meaning of “close company”. U.K.

(1) In section 414 of the Taxes Act 1988 for subsection (2) (further case inwhich a company is a close company for the purposes of the Tax Acts) thereshall be substituted—

“(2) Subject to section 415 and subsection (5) below, a company resident in theUnited Kingdom (but not falling within subsection (1)(b) above) is also aclose company if five or fewer participators, or participators who aredirectors, together possess or are entitled to acquire—

(a) such rights as would, in the event of the winding-up of the company(“the relevant company”) on the basis set out in subsection (2A) below,entitle them to receive the greater part of the assets of the relevant companywhich would then be available for distribution among the participators, or

(b) such rights as would in that event so entitle them if any rights which anyof them or any other person has as a loan creditor (in relation to therelevant company or any other company) were disregarded.

(2A) In the notional winding-up of the relevant company, the part of the assetsavailable for distribution among the participators which any person isentitled to receive is the aggregate of—

(a) any part of those assets which he would be entitled to receive in theevent of the winding-up of the company, and

(b) any part of those assets which he would be entitled to receive if—

(i) any other company which is a participator in the relevant company and isentitled to receive any assets in the notional winding-up were also wound upon the basis set out in this subsection, and

(ii) the part of the assets of the relevant company to which the other companyis entitled were distributed among the participators in the other company inproportion to their respective entitlement to the assets of the other companyavailable for distribution among the participators.

(2B) In the application of subsection (2A) above to the notional winding-up ofthe other company and to any further notional winding-up required by paragraph(b) of that subsection (or by any further application of that paragraph),references to “the relevant company” shall have effect as references tothe company concerned.

(2C) In ascertaining under subsection (2) above whether five or fewerparticipators, or participators who are directors, together possess or areentitled to acquire rights such as are mentioned in paragraph (a) or (b) ofthat subsection—

(a) a person shall be treated as a participator in or director of the relevantcompany if he is a participator in or director of any other company whichwould be entitled to receive assets in the notional winding-up of the relevantcompany on the basis set out in subsection (2A) above, and

(b) except in the application of subsection (2A) above, no account shall betaken of a participator which is a company unless the company possesses or isentitled to acquire the rights in a fiduciary or representative capacity.

(2D) Subsections (4) to (6) of section 416 apply for the purposes ofsubsections (2) and (2A) above as they apply for the purposes of subsection(2) of that section.”

(2) Subsection (3) of that section shall cease to have effect.

(3) In subsection (5)(b) of that section for the words from “paragraph(c)” to “that paragraph” there shall be substituted the words “paragraph (a) of subsection (2) above or paragraph (c) of section 416(2)and it would not be a close company if the references in those paragraphs”.

(4) This section shall be deemed to have come into force on 1st April 1989.

105 Small companies’ rate not available to certain close companies. U.K.

(1) In section 13 of the Taxes Act 1988 (small companies’ relief) insubsection (1) for the words “a company resident in the United Kingdom”there shall be substituted the words “a company which—

(a) is resident in the United Kingdom, and

(b) is not a close investment-holding company (as defined in section 13A) atthe end of that period,”.

(2) After that section there shall be inserted the following section—

“13A Close investment-holding companies.

(1) A close company is for the purposes of section 13(1) a “closeinvestment-holding company” unless it complies with subsection (2) below.

(2) A company (“the relevant company”) complies with this subsection inany accounting period if throughout that period it exists wholly or mainly forany one or more of the following purposes—

(a) the purpose of carrying on a trade or trades on a commercial basis,

(b) the purpose of making investments in land or estates or interests in landin cases where the land is, or is intended to be, let to persons otherthan—

(i) any person connected with the relevant company, or

(ii) any person who is the wife or husband of an individual connected with therelevant company, or is a relative, or the wife or husband of a relative, ofsuch an individual or of the husband or wife of such an individual,

(c) the purpose of holding shares in and securities of, or making loans to,one or more companies each of which is a qualifying company or a companywhich—

(i) is under the control of the relevant company or of a company which hascontrol of the relevant company, and

(ii) itself exists wholly or mainly for the purpose of holding shares in orsecurities of, or making loans to, one or more qualifying companies,

(d) the purpose of co-ordinating the administration of two or more qualifyingcompanies,

(e) the purpose of a trade or trades carried on on a commercial basis by oneor more qualifying companies or by a company which has control of the relevantcompany, and

(f) the purpose of the making, by one or more qualifying companies or by acompany which has control of the relevant company, of investments as mentionedin paragraph (b) above.

(3) For the purposes of subsection (2) above, a company is a “qualifying company”, in relation to the relevant company,if it—

(a) is under the control of the relevant company or of a company which hascontrol of the relevant company, and

(b) exists wholly or mainly for either or both of the purposes mentioned insubsection (2)(a) or (b) above.

(4) Where a company is wound up, it shall not be treated as failing to complywith subsection (2) above in the accounting period that (by virtue ofsubsection (7) of section 12) begins with the time which is for the purposesof that subsection the commencement of the winding up, if it complied withsubsection (2) above in the accounting period that ends with that time.

(5) In this section—

• “control” shall be construed in accordance with section 416,and

• “relative” has the meaning given by section 839(8).

(6) Section 839 shall apply for the purposes of this section.”

(3) This section shall have effect in relation to accounting periods beginningafter 31st March 1989.

[F215 106 Restriction on payment of tax credits. U.K.

(1) In section 231 of the Taxes Act 1988 (tax credits for certain recipientsof qualifying distributions) in subsection (3) after the words “made and”there shall be inserted the words “subject to subsections (3A) to (3D)below” and after that subsection there shall be inserted—

“(3A) Subject to subsection (3B) below, where it appears to the inspector that,in any accounting period of a company at the end of which it is a closeinvestment-holding company—

(a) arrangements relating to the distribution of the profits of the companyexist or have existed the main purpose of which or one of the main purposesof which is to enable payments, or payments of a greater amount, to be madeto any one or more individuals under subsection (3) above in respect of suchan excess as is mentioned in that subsection, and

(b) by virtue of those arrangements, any eligible person—

(i) receives a qualifying distribution consisting of a payment made by thecompany on the redemption, repayment or purchase of its own shares, or

(ii) receives any other qualifying distribution in respect of shares in orsecurities of the company, where the amount or value of the distribution isgreater than might in all the circumstances have been expected but for thearrangements,

the entitlement of the eligible person to have paid to him undersubsection (3) above all or part of a tax credit in respect of anydistribution made by the company in the period shall be restricted to suchextent as appears to the inspector to be just and reasonable.

(3B) Subsection (3A) above does not apply in relation to a tax credit inrespect of a dividend paid by a company in any accounting period in respectof its ordinary share capital if—

(a) throughout the period, the company’s ordinary share capital consisted ofonly one class of shares, and

(b) no person waived his entitlement to any dividend which would have becomepayable by the company in the period or failed to receive any dividend whichhad become due and payable to him by the company in the period.

(3C) In subsection (3A) above—

• “arrangements” means arrangements of any kind whether inwriting or not,

• “close investment-holding company” has the meaning given bysection 13A, and

• “eligible person”, in relation to a qualifying distribution,means an individual resident in the United Kingdom who would (apart fromsubsection (3A) above) be entitled to have paid to him under subsection (3)above all or part of a tax credit in respect of the distribution.

(3D) In determining under subsection (3) above whether a person is entitled tohave any excess of tax credit paid to him in a case where subsection (3A)above applies, tax credits shall be set against income tax in the order thatresults in the greatest payment in respect of the excess.”

(2) This section shall have effect in relation to distributions made bycompanies in accounting periods beginning after 31st March 1989.]

Textual Amendments

F215 S. 106 repealed (31.7.1997 with effect in relation to distributions made on or after 6.4.1999) by 1997 c. 58, s. 52, Sch. 8 Pt. II(9), note 3

107 Close companies: consequential amendments. U.K.

Schedule 12 to this Act (in which Part I contains administrativeprovisions relating to close companies and Part II makes amendments connectedwith section 103 above) shall have effect.

Settlements etc. U.K.

F216 108 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F216 S. 108 repealed (1.5.1995 with effect for the year 1995-96 and subsequent years of assessment) by 1995 c. 4, s. 162, Sch. 29 Pt. VIII(8), note

109 Settlements where settlor retains interest in settled property. U.K.

F217 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F217 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F217 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In section 677(2)(c) of that Act, after “674” there shall be inserted “674A”.

Textual Amendments

F217 S. 109(1)-(3) repealed (1.5.1995 with effect for the year 1995-96 and subsequent years of assessment) by 1995 c. 4, s. 162, Sch. 29 Pt. VIII(8), note

110 Residence of trustees. U.K.

(1) Where the trustees of a settlement include at least one who is notresident in the United Kingdom as well as at least one who is, then for allthe purposes of the Income Tax Acts—

(a) if the condition in subsection (2) below is satisfied, the trustee ortrustees not resident in the United Kingdom shall be treated as residentthere, and

(b) otherwise, the trustee or trustees resident in the United Kingdom shallbe treated as not resident there (but as resident outside the United Kingdom).

(2) The condition referred to in subsection (1) above is that the settlor or,where there is more than one, any of them is at any relevant time—

(a) resident in the United Kingdom,

(b) ordinarily resident there, or

(c) domiciled there.

(3) For the purposes of subsection (2) above the following are relevant timesin relation to a settlor—

(a) in the case of a settlement arising under a testamentary disposition ofthe settlor or on his intestacy, the time of his death, and

(b) in the case of any other settlement, the time or, where there is more thanone, each of the times when he has provided funds directly or indirectly forthe purposes of the settlement.

(4) For the purposes of this section “settlor”, in relationto a settlement, includes any person who has provided or undertaken to providefunds directly or indirectly for the purposes of the settlement.

(5) In section 824(9) of the Taxes Act 1988 (repayment supplements), for thewords “or a United Kingdom trust (as defined in section 231),” thereshall be substituted the words “the trustees of a settlement”.

(6) Subject to subsections (7) to (9) below, this section shall apply for theyear 1989-90 and subsequent years of assessment.

(7) For the purpose of determining the residence of trustees at any timeduring the year 1989-90, the condition in subsection (2) above shall beregarded as not having been satisfied if none of the trustees of thesettlement is resident in the United Kingdom at any time during the periodbeginning with 1st October 1989 and ending with 5th April 1990.

(8) This section shall not apply for any of the purposes of section 739 of theTaxes Act 1988 in relation to income payable before 15th June 1989, or for thepurposes of subsection (3) of that section in relation to income payable onor after that date if—

(a) the capital sum there referred to is received, or the right to receive itis acquired, before that date, and

(b) that sum is wholly repaid, or the right to it waived, before 1st October1989.

(9) This section shall not apply for any of the purposes of section 740 of theTaxes Act 1988 in relation to benefits received before 15th June 1989; and,in relation to benefits received on or after that date, “relevant income”for those purposes shall include income arising to trustees before 6th April1989 notwithstanding that one or more of them was not resident outside theUnited Kingdom, unless they have been charged to tax in respect of it.

111 Residence of personal representatives. U.K.

(1) Where the personal representatives of a deceased person include at leastone who is not resident in the United Kingdom as well as at least one who is,then for all the purposes of the Income Tax Acts—

(a) if the condition in subsection (2) below is satisfied, the personalrepresentative or representatives not resident in the United Kingdom shall betreated as resident there, and

(b) otherwise, the personal representative or representatives resident in theUnited Kingdom shall be treated as not resident there (but as resident outsidethe United Kingdom).

(2) The condition referred to in subsection (1) above is that the deceasedperson is at his death—

(a) resident in the United Kingdom,

(b) ordinarily resident there, or

(c) domiciled there.

(3) In this section “personal representatives” means—

(a) in relation to England and Wales, the deceased person’s personalrepresentatives as defined by section 55 of the M7 Administration of Estates Act 1925;

(b) in relation to Scotland, his executor or the judicial factor on hisestate;

(c) in relation to Northern Ireland, his personal representatives as definedby section 45(1) of the M8 Administration of EstatesAct (Northern Ireland) 1955; and

(d) in relation to another country or territory, the persons having inrelation to him under its law any functions corresponding to the functions foradministration purposes of personal representatives under the law of Englandand Wales.

(4) In section 824(9) of the Taxes Act 1988 (repayment supplements), for thewords from “or, in” to “section 701)” there shall be substituted thewords “or personal representatives (within the meaning of section 111 of theFinance Act 1989)”.

(5) Subject to subsections (6) to (8) below, this section shall apply for theyear 1989-90 and subsequent years of assessment.

(6) For the purpose of determining the residence of personal representativesat any time during the year 1989-90, the condition in subsection (2) aboveshall be regarded as not having been satisfied if none of the personalrepresentatives is resident in the United Kingdom at any time during theperiod beginning with 1st October 1989 and ending with 5th April 1990.

(7) This section shall not apply for any of the purposes of section 739 of theTaxes Act 1988 in relation to income payable before 15th June 1989, or for thepurposes of subsection (3) of that section in relation to income payable onor after that date if—

(a) the capital sum there referred to is received, or the right to receive itis acquired, before that date, and

(b) that sum is wholly repaid, or the right to it waived, before 1st October1989.

(8) This section shall not apply for any of the purposes of section 740 of theTaxes Act 1988 in relation to benefits received before 15th June 1989 and, inrelation to benefits received on or after that date, “relevant income”for those purposes shall include income arising to personal representativesbefore 6th April 1989 notwithstanding that one or more of them was notresident outside the United Kingdom, unless they have been charged to tax inrespect of it.

Marginal Citations

M7 1925 c.23.

M8 1955 c. 24 (N.I.).

Miscellaneous U.K.

112 Security: trades etc. U.K.

(1) This section applies in computing, for the purposes of Case I or Case IIof Schedule D, the [F218 profits] of a trade, profession or vocation carriedon by an individual or by a partnership of individuals.

(2) In a case where this section applies, nothing in section 74(a) or (b) ofthe Taxes Act 1988 (deductions limited by reference to purposes of trade etc.)shall prevent the deduction of a sum in respect of expenditure incurred inconnection with the provision for or use by the individual, or any of theindividuals, of a security asset or security service.

(3) Subsection (2) above shall not apply unless the asset or service isprovided or used to meet a threat which—

(a) is a special threat to the individual’s personal physical security, and

(b) arises wholly or mainly by virtue of the particular trade, profession orvocation concerned.

(4) Subsection (2) above shall not apply unless the person incurring theexpenditure has as his sole object in doing so the meeting of that threat.

(5) Subsection (2) above shall not apply in the case of a service unless thebenefit resulting to the individual consists wholly or mainly of animprovement of his personal physical security.

(6) Subsection (2) above shall not apply in the case of an asset unless theperson incurring the expenditure intends the asset to be used solely toimprove personal physical security.

(7) But in a case where—

(a) apart from subsection (6) above, subsection (2) above would apply in thecase of an asset, and

(b) the person incurring the expenditure intends the asset to be used partlyto improve personal physical security,

subsection (2) shall nevertheless apply, but only as regards theappropriate proportion of the expenditure there mentioned.

(8) For the purposes of subsection (7) above the appropriate proportion of theexpenditure mentioned in subsection (2) above is such proportion of thatexpenditure as is attributable to the intention of the person incurring itthat the asset be used to improve personal physical security.

Textual Amendments

F218 Word in s. 112(1) substituted (31.7.1998) by 1998 c. 36, s. 46(3), Sch. 7 para. 3

Modifications etc. (not altering text)

C42 S. 112 applied (31.7.1998 with effect as mentioned in s. 38(2)(3) of 1998 c. 36) by 1988 c. 1, s. 21A(2) (as substituted by 1998 c. 36, s. 38(1), Sch. 5 Pt. I paras. 4, 73)

113 Security: trades etc. (supplementary). U.K.

(1) For the purposes of section 112 above—

(a) a security asset is an asset which improves personal security,

(b) a security service is a service which improves personal security,

(c) references to an asset do not include references to a car, a ship or anaircraft,

(d) references to an asset or service do not include references to a dwellingor grounds appurtenant to a dwelling, and

(e) references to an asset include references to equipment and a structure(such as a wall).

(2) If the person incurring the expenditure intends the asset to be usedsolely to improve personal physical security, but there is another use for theasset which is incidental to improving personal physical security, that otheruse shall be ignored in construing section 112(6) above.

(3) The fact that an asset or service improves the personal physical securityof any member of the family or household of the individual concerned, as wellas that of the individual, shall not prevent section 112(2) above fromapplying.

(4) For the purposes of section 112 above in its application to an asset, itis immaterial whether or not the asset becomes affixed to land (whetherconstituting a dwelling or otherwise).

(5) For the purposes of section 112 above in its application to an asset, itis immaterial whether or not the individual concerned is or becomes entitledto the property in the asset or (in the case of a fixture) an estate orinterest in the land concerned.

(6) Section 112 above applies where expenditure is incurred on or after 6thApril 1989.

Modifications etc. (not altering text)

C43 S. 113 applied (31.7.1998 with effect as mentioned in s. 38(2)(3) of 1998 c. 36) by 1988 c. 1, s. 21A(2) (as substituted by 1998 c. 36, s. 38(1), Sch. 5 Pt. I paras. 4, 73)

114 Relief for pre-trading expenditure. U.K.

(1) In section 401(1) of the Taxes Act 1988 (which gives relief forexpenditure incurred by a person within three years before he begins to carryon a trade, profession or vocation), for the word “three” there shall besubstituted the word “five”.

(2) This section shall have effect where the time when the person begins tocarry on the trade, profession or vocation falls after the end of March 1989.

115 Double taxation: tax credits. U.K.

(1) Where any arrangements having effect by virtue of section 788 of the TaxesAct 1988 provide —

(a) for persons who are resident outside the United Kingdom and who receivedistributions from companies resident in the United Kingdom to be entitled totax credits, and

(b) for the amount paid to such a person by way of tax credit to be determinedby reference to the amount to which an individual resident in the UnitedKingdom would have been entitled, subject to a deduction calculated byreference to the aggregate of the amount or value of the distribution and theamount of the tax credit paid,

the arrangements shall be construed as providing for that deduction tobe calculated by reference to the gross amount or value of the distributionand tax credit, without any allowance for the deduction itself.

(2) This section shall have effect in relation to payments made before thepassing of this Act as well as those made after that time, except that itshall not affect—

(a) the judgment of any court given before 25th October 1988, or

(b) the law to be applied in proceedings on appeal to the Court of Appeal orthe House of Lords where the judgment of the High Court or the Court ofSession which is in issue was given before that date.

F219 116 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F219 S. 116 repealed (29.4.1996 with effect as mentioned in s. 105(1) of the amending Act) by 1996 c. 8, s. 205, Sch. 41 Pt. V(3), note

Chapter II U.K. Capital Allowances

117–120 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F220 U.K.

Textual Amendments

F220 Ss. 117–120 repealed by Capital Allowance Act 1990 (c.1, SIF 63:1), s. 164(4)(5), Sch. 2

F221 121 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F221 S. 121 repealed (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, s. 580, Sch. 4

CHAPTER III U.K. Capital Gains

Exemptions U.K.

F222 122 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F222 S. 122 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

123 Increase of chattel exemption. U.K.

(1) In the following enactments, namely—

F223 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) section 12(2)(b) of the M9 Taxes Management Act 1970(information about assets acquired), and

(c) section 25(7) of that Act (information about assets disposed of),

for “£3,000”, in each place where it occurs, there shall besubstituted “£6,000”.

(2) This section applies to disposals on or after 6th April 1989 andaccordingly, in relation to subsection (1)(b) above, to assets acquired on orafter that date.

Textual Amendments

F223 S. 123(1)(a) repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

Marginal Citations

M9 1970 c. 9.

Gifts U.K.

F224 124 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F224 S. 124 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F225 125 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F225 S. 125 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

Non-residents etc. U.K.

F226 126 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F226 S. 126 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F227 127 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F227 S. 127 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F228 128 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F228 S. 128 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F229 129 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F229 S. 129 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F230 130 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F230 S. 130 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F231 131 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F231 S. 131 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F232 132 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F232 S. 132 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F233 133 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F233 S. 133 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F234 134 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F234 S. 134 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

Value shifting and groups of companies U.K.

F235 135 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F235 S. 135 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F236 136 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F236 S. 136 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F237 137 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F237 S. 137 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F238 138 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F238 S. 138 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

Miscellaneous U.K.

F239 139 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F239 S. 139 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F240 140 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F240 S. 140 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

F241 141 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F241 S. 141 repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with ss. 201(3), Sch. 11 paras. 22, 26(2), 27)

CHAPTER IV U.K. Management

Information U.K.

142 Power to call for documents and information. U.K.

(1) Section 20 of the M10 Taxes Management Act 1970 (power tocall for documents of taxpayer and others) shall be amended in accordance withsubsections (2) to (8) below.

(2) In subsection (1), for the words “a person” onwards there shall besubstituted the words “a person—

(a) to deliver to him such documents as are in the person’s possession orpower and as (in the inspector’s reasonable opinion) contain, or may contain,information relevant to—

(i) any tax liability to which the person is or may be subject, or

(ii) the amount of any such liability, or

(b) to furnish to him such particulars as the inspector may reasonably requireas being relevant to, or to the amount of, any such liability.”

(3) In subsection (2), for the words “a person” onwards there shall besubstituted the words “a person

(a) to deliver to a named officer of the Board such documents as are in theperson’s possession or power and as (in the Board’s reasonable opinion)contain, or may contain, information relevant to—

(i) any tax liability to which the person is or may be subject, or

(ii) the amount of any such liability, or

(b) to furnish to a named officer of the Board such particulars as the Boardmay reasonably require as being relevant to, or to the amount of, any suchliability.”

(4) In subsection (3)—

(a) for the words “of the persons who in relation to the taxpayer aresubject to this subsection” there shall be substituted the words “otherperson”, and

(b) at the end there shall be added the words “; and the persons who may berequired to deliver or make available a document under this subsection includethe Director of Savings.”

(5) Subsections (4) and (5) shall be omitted.

(6) In subsection (6)—

(a) for the words “under subsections (3) and (4)” there shall besubstituted the words “for the purposes of this section”, and

(b) the words “and in relation” onwards shall be omitted.

(7) For subsection (8) there shall be substituted—

“(8) Subject to subsection (8A) below, a notice under subsection (3) aboveshall name the taxpayer with whose liability the inspector (or, where section20B(3) below applies, the Board is concerned.”

(8) After subsection (8B) there shall be inserted—

“(8C) In this section references to documents do not include—

(a) personal records (as defined in section 12 of the Police and Criminal Evidence Act 1984), or

(b) journalistic material (as defined in section 13 of that Act),

and references to particulars do not include particulars contained insuch personal records or journalistic material.

(8D) Subject to subsection (8C) above, references in this section to documentsand particulars are to those specified or described in the notice in question;and—

(a) the notice shall require documents to be delivered (or delivered or madeavailable), or particulars to be furnished, within such time (which, exceptin the case of a notice under subsection (2) above, shall not be less thanthirty days after the date of the notice) as may be specified in the notice;and

(b) the person to whom they are delivered, made available or furnished maytake copies of them or of extracts from them.”

(9) In section 12(3) of the M11 National Savings Bank Act1971, for the words “20(4)(b)” onwards there shall be substituted thewords “20(3) of that Act (requirement to deliver or make available documentsrelating to liability of a taxpayer).”

(10) This section shall apply with respect to notices given on or after the dayon which this Act is passed.

Marginal Citations

M10 1970 c. 9.

M11 1971 c. 29.

143 Power to call for papers of tax accountant. U.K.

(1) In section 20A of the M12 Taxes Management Act 1970 (powerto call for papers of tax accountant) for the lasr sentence of subsection (1)there shall be substituted—

“(1A) The reference to documents in subsection (1) above does not include—

(a) personal records (as defined in section 12 of the Police and Criminal Evidence Act 1984), or

(b) journalistic material (as defined in section 13 of that Act).

(1B) Subject to subsection (1A) above, the reference to documents in subsection(1) above is to those specified or described in the notice in question;and—

(a) the notice shall require documents to be delivered within such time (whichshall not be less than thirty days after the date of the notice) as may bespecified in the notice; and

(b) the inspector may take copies of them or of extracts from them.”

(2) This section shall apply with respect to notices given on or after the dayon which this Act is passed.

Marginal Citations

M12 1970 c. 9.

144 Restrictions on powers under TMA ss.20 and 20A. U.K.

(1) Section 20B of the M13 Taxes Management Act 1970(restrictions on powers under sections 20 and 20A) shall be amended asfollows.

(2) In subsection (1), after the word “question” there shall be insertedthe words “, or to furnish the particulars in question”.

(3) After that subsection there shall be inserted—

“(1A) Subject to subsection (1B) below, where a notice is given to any personunder section 20(3) the inspector shall give a copy of the notice to thetaxpayer to whom it relates.

(1B) If, on an application by the inspector, a General or Special Commissionerso directs, a copy of a notice under section 20(3) need not be given to thetaxpayer to whom it relates; but such a direction shall not be given unlessthe Commissioner is satisfied that the inspector has reasonable grounds forsuspecting the taxpayer of fraud.”

(4) In subsection (2), after the words “deliver documents”, in the firstplace where they occur, there shall be inserted the words “or furnishparticulars”.

(5) In subsection (5), for the words from “if” to “or company” thereshall be substituted the words “does not oblige a person”.

(6) In subsection (7), the words from “to a person” to “daughter”shall be omitted.

(7) For subsection (9) there shall be substituted—

“(9) Subject to subsections (11) and (12) below, a notice under section 20(3)or (8A)—

(a) does not oblige a person who has been appointed as an auditor for thepurposes of any enactment to deliver or make available documents which are hisproperty and were created by him or on his behalf for or in connection withthe performance of his functions under that enactment, and

(b) does not oblige a tax adviser to deliver or make available documents whichare his property and consist of relevant communications.

(10) In subsections (9) above “relevant communications” meanscommunications between the tax adviser and —

(a) a person in relation to whose tax affairs he has been appointed, or

(b) any other tax adviser of such a person,

the purpose of which is the giving or obtaining of advice about any ofthose tax affairs; and in subsection (9) above and this subsection “tax adviser” means a person appointed to give advice aboutthe tax affairs of another person (whether appointed directly by that otherperson or by another tax adviser of his).

(11) Subject to subsection (13) below, subsection (9) above shall not haveeffect in relation to any document which contains information explaining anyinformation, return, accounts or other document which the person to whom thenotice is given has, as tax accountant, assisted any client of his inpreparing for, or delivering to, the inspector or the Board.

(12) Subject to subsection (13) below, in the case of a notice under section20(8A) subsection (9) above shall not have effect in relation to any documentwhich contains information giving the identity or address of any taxpayer towhom the notice relates or of any person who has acted on behalf of any suchperson.

(13) Subsection (9) above is not disapplied by subsection (11) or (12) abovein the case of any document if—

(a) the information within subsection (11) or (12) is contained in some otherdocument, and

(b) either—

(i) that other document, or a copy of it, has been delivered to the inspectoror the Board, or

(ii) that other document has been inspected by an officer of the Board.

(14) Where subsection (9) above is disapplied by subsection (11) or (12) abovein the case of a document, the person to whom the notice is given either shalldeliver the document to the inspector or make it available for inspection byan officer of the Board or shall—

(a) deliver to the inspector (or, where subsection (3) above applies, theBoard) a copy (which is photographic or otherwise by way of facsimile) of anyparts of the document which contain the information within subsection (11) or(12), and

(b) if so required by the inspector (or, as the case may be, the Board), makeavailable for inspection by a named officer of the Board such parts of thedocument as contain that information;

and failure to comply with any requirement under paragraph (b) aboveshall constitute a failure to comply with the notice.”

(8) This section shall apply with respect to notices given on or after the dayon which this Act is passed.

Marginal Citations

M13 1970c. 9.

145 Falsification etc. of documents. U.K.

(1) After section 20B of the M14 Taxes Management Act 1970there shall be inserted—

“20BB Falsification etc. of documents.

(1) Subject to subsections (2) to (4) below, a person shall be guilty of anoffence if he intentionally falsifies, conceals, destroys or otherwisedisposes of, or causes or permits the falsification, concealment, destructionor disposal of, a document which—

(a) he has been required by a notice under section 20 or 20A above, or

(b) he has been given an opportunity in accordance with section 20B(1) above,

to deliver, or to deliver or make available for inspection.

(2) A person does not commit an offence under subsection (1) above if heacts—

(a) with the written permission of a General or Special Commissioner, theinspector or an officer of the Board,

(b) after the document has been delivered or, in a case within section 20(3)or (8A) above, inspected, or

(c) after a copy has been delivered in accordance with section 20B(4) or (14)above and the original has been inspected.

(3) A person does not commit an offence under subsection (1)(a) above if heacts after the end of the period of two years beginning with the date on whichthe notice is given, unless before the end of that period the inspector or anofficer of the Board has notified the person in writing that the notice hasnot been complied with to his satisfaction.

(4) A person does not commit an offence under subsection (1) (b) above if heacts—

(a) after the end of the period of six months beginning with the date on whichan opportunity to deliver the document was given, or

(b) after an application for consent to a notice being given in relation tothe document has been refused.

(5) A person guilty of an offence under subsection (1) above shall beliable—

(a) on summary conviction, to a fine not exceeding the statutory maximum;

(b) on conviction on indictment, to imprisonment for a term not exceeding twoyears or to a fine or to both.”

(2) This section shall apply to any falsification, concealment, destructionor disposal of a document occurring on or after the day on which this Act ispassed.

Marginal Citations

M14 1970 c. 9.

146 Entry with warrant to obtain documents. U.K.

(1) Section 20C of the M15 Taxes Management Act 1970 (entrywith warrant to obtain documents) shall be amended as follows.

(2) In subsection (1)—

(a) for the words “any form of fraud” there shall be substituted thewords “serious fraud”, and

(b) for the words “has been” there shall be substituted the words “isbeing, has been or is about to be”.

(3) After that subsection there shall be inserted—

“(1A) Without prejudice to the generality of the concept of serious fraud—

(a) any offence which involves fraud is for the purposes of this section anoffence involving serious fraud if its commission had led, or is intended orlikely to lead, either to substantial financial gain to any person or toserious prejudice to the proper assessment or collection of tax; and

(b) an offence which, if considered alone, would not be regarded as involvingserious fraud may nevertheless be so regarded if there is reasonable groundfor suspecting that it forms part of a course of conduct which is, or but forits detection would be, likely to result in serious prejudice to the properassessment or collection of tax.

(1B) The powers conferred by a warrant under this section shall not beexercisable—

(a) by more than such number of officers of the Board as may be specified inthe warrant;

(b) outside such times of day as may be so specified;

(c) if the warrant so provides, otherwise than in the presence of a constablein uniform.”

(4) For subsections (3) to (5) there shall be substituted—

“(3) An officer who enters the premises under the authority of a warrant underthis section may—

(a) take with him such other persons as appear to him to be necessary;

(b) seize and remove any things whatsoever found there which he has reasonablecause to believe may be required as evidence for the purposes of proceedingsin respect of such an offence as is mentioned in subsection (1) above; and

(c) search or cause to be searched any person found on the premises whom hehas reasonable cause to believe to be in possession of any such things;

but no person shall be searched except by a person of the same sex.

(4) Nothing in subsection (3) above authorises the seizure and removal ofdocuments in the possession of a barrister, advocate or solicitor with respectto which a claim to professional privilege could be maintained.

(5) An officer of the Board seeking to exercise the powers conferred by awarrant under this section or, if there is more than one such officer, thatone of them who is in charge of the search—

(a) if the occupier of the premises concerned is present at the time thesearch is to begin, shall supply a copy of the warrant endorsed with his nameto the occupier;

(b) if at that time the occupier is not present but a person who appears tothe officer to be in charge of the premises is present, shall supply such acopy to that person; and

(c) if neither paragraph (a) nor paragraph (b) above applies, shall leave sucha copy in a prominent place on the premises.

(6) Where entry to premises has been made with a warrant under this section,and the officer making the entry has seized any things under the authority ofthe warrant, he shall endorse on or attach to the warrant a list of the thingsseized.

(7) Subsections (10) to (12) of section 16 of the Policeand Criminal Evidence Act 1984 (return, retention and inspection of warrants)apply to a warrant under this section (together with any list endorsed on orattached to it under subsection (6) above) as they apply to a warrant issuedto a constable under any enactment.

(8) Subsection (7) above extends to England and Wales only.”

(5) This section shall apply with respect to warrants issued on or after theday on which this Act is passed.

Marginal Citations

M15 1970 c. 9.

147 Procedure where documents etc. are removed. U.K.

(1) The following section shall be inserted after section 20C of the M16 Taxes Management Act 1970—

“20CC Procedure where documents etc. are removed.

(1) An officer of the Board who removes anything in the exercise of the powerconferred by section 20C above shall, if so requested by a person showinghimself—

(a) to be the occupier of premises from which it was removed, or

(b) to have had custody or control of it immediately before the removal,

provide that person with a record of what he removed.

(2) The officer of the Board shall provide the record within a reasonable timefrom the making of the request for it.

(3) Where anything which has been removed by an officer of the Board asmentioned in subsection (1) above is of such a nature that a photograph orcopy of it would be sufficient—

(a) for use as evidence at a trial for an offence, or

(b) for forensic examination or for investigation in connection with anoffence,

it shall not be retained longer than is necessary to establish that factand to obtain the photograph or copy.

(4) Subject to subsection (8) below, if a request for permission to be grantedaccess to anything which—

(a) has been removed by an officer of the Board, and

(b) is retained by the Board for the purpose of investigating an offence,

is made to the officer in overall charge of the investigation by a personwho had custody or control of the thing immediately before it was so removedor by someone acting on behalf of any such person, the officer shall allow theperson who made the request access to it under the supervision of an officerof the Board.

(5) Subject to subsection (8) below, if a request for a photograph or copy ofany such thing is made to the officer in overall charge of the investigationby a person who had custody or control of the thing immediately before it wasso removed, or by someone acting on behalf of any such person, the officershall—

(a) allow the person who made the request access to it under the supervisionof an officer of the Board for the purpose of photographing it or copying it,or

(b) photograph or copy it, or cause it to be photographed or copied.

(6) Where anything is photographed or copied under subsection (5)(b) above thephotograph or copy shall be supplied to the person who made the request.

(7) The photograph or copy shall be supplied within a reasonable time from themaking of the request.

(8) There is no duty under this section to grant access to, or to supply aphotograph or copy of, anything if the officer in overall charge of theinvestigation for the purposes of which it was removed has reasonable groundsfor believing that to do so would prejudice—

(a) that investigation;

(b) the investigation of an offence other than the offence for the purposesof the investigation of which the thing was removed; or

(c) any criminal proceedings which may be brought as a result of—

(i) the investigation of which he is in charge, or

(ii) any such investigation as is mentioned in paragraph (b) above.

(9) Any reference in this section to the officer in overall charge of theinvestigation is a reference to the person whose name and address are endorsedon the warrant concerned as being the officer so in charge.”

(2) This section shall apply with respect to warrants issued on or after theday on which this Act is passed.

Marginal Citations

M16 1970c. 9.

148 Interpretation. U.K.

(1) Section 20D of the M17 Taxes Management Act 1970 shall beamended as follows.

(2) In subsection (2), for the words “of returns or accounts to be made ordelivered by the other” there shall be substituted the words “or deliveryof any information, return, accounts or other document which he knows will be,or is or are likely to be, used”.

(3) For subsection (3) there shall be substituted—

“(3) Without prejudice to section 127 of the Finance Act1988, in sections 20 to 20CC above “document” has, subject to sections 20(8C) and 20A(1A), thesame meaning as it has—

(a) in relation to England and Wales, in Part I of the Civil Evidence Act 1968,

(b) in relation to Scotland, in Part III of the Law Reform(Miscellaneous Provisions) (Scotland) Act 1968, and

(c) in relation to Northern Ireland, in Part I of the Civil Evidence Act (Northern Ireland) 1971.”

(4) Subsection (3) above shall not affect the meaning of “business” in sections 20 and 20C of the M18 Taxes Management Act 1970 before the coming into force of sections 142and 146 above.

Marginal Citations

M17 1970 c. 9.

M18 1970 c.9.

Assessments, claims etc. U.K.

149 Assessments founded on fraudulent or negligent conduct. U.K.

(1) The following section shall be substituted for section 36 of the TaxesManagement Act 1970—

“36 Fraudulent or negligent conduct.

(1) An assessment on any person (in this section referred to as “theperson in default”) for the purpose of making good to the Crown aloss of tax attributable to his fraudulent or negligent conduct or thefraudulent or negligent conduct of a person acting on his behalf may be madeat any time not later than twenty years after the end of the chargeable periodto which the assessment relates.

(2) Where the person in default is an individual who carried on a trade orprofession in partnership with another individual, or with other persons atleast one of whom is an individual, at any time in the year for which theassessment is made, an assessment in respect of the profits or gains of thetrade or profession for the purpose mentioned in subsection (1) above may bemade not only on the person in default but also on his partner or, as the casemay be, on any of his partners who is an individual.

(3) If the person on whom the assessment is made so requires, in determiningthe amount of the tax to be charged for any chargeable period in anyassessment made for the purpose mentioned in subsection (1) above, effectshall be given to any relief or allowance to which he would have been entitledfor that chargeable period on a claim or application made within the timeallowed by the Taxes Acts.”

(2) Sections 37 to 39 (special provisions as to “neglect”) and section41 (leave required for certain assessments) of the Taxes Management Act 1970shall cease to have effect.

(3) The words “section 36” shall be substituted—

(a) for the words “sections 36, 37 and 39” in section 30(6) of the M19 Taxes Management Act 1970 (tax repaid in error etc.),

(b) for the words “sections 37 to 39” in section 118(3) ofthat Act (effect under law of Scotland of assessment in partnership name),

[F242 (c) for the words “sections 36 and 39” in paragraph 10(1) of Schedule 13to the Taxes Act 1988 (assessments to advance corporation tax),] and

(d) for the words “sections 36 and 37” in paragraph 10(1) of Schedule 16to that Act (assessments to income tax on company payments which are notdistributions).

(4) The words “ fraudulent or negligent conduct ” shall besubstituted—

(a) for the words “fraud, wilful default or neglect” in—

(i) section 37A of the Taxes Management Act 1970 (married couples),

(ii) section 40(2) of that Act (assessment on personal representatives), and

(iii) paragraph 9 of Schedule 16A to the M20 Finance Act 1973and of Schedule 19A to the Taxes Act 1988 (Lloyd’s), and

(b) for the words “fraud and wilful default) and section 37 of that Act(neglect” in section 307(5) of the Taxes Act 1988 (assessments forwithdrawing relief under Chapter III of Part VII of that Act).

(5) In section 105 of the Taxes Management Act 1970 (admissibility ofevidence), for the words “fraud or default” and the words “fraud orwilful default” there shall be substituted the words “fraudulentconduct”.

(6) In paragraph 9 of Schedule 16A to the Finance Act 1973 and of Schedule 19Ato the Taxes Act 1988, for “37, 40 and 41” there shall be substituted “and 40”.

(7) Nothing in this section shall affect the making of assessments—

(a) for years of assessment before the year 1983-84, or

(b) for accounting periods which ended before 1st April 1983.

Textual Amendments

F242 S. 149(3)(c) repealed (31.7.1998 with effect in accordance with Sch. 3 of the amending Act) by 1998 c. 36, s. 165, Sch. 27 Pt. III(2), note

Marginal Citations

M19 1970 c.9.

M20 1973 c. 51.

150 Further assessments: claims etc. U.K.

(1) The following sections shall be inserted after section 43 of the TaxesManagement Act 1970—

“43A Further assessments: claims etc.

(1) This section applies where—

(a) by virtue of section 29(3) of this Act an assessment is made on any personfor a chargeable period, and

(b) the assessment is not made for the purpose of making good to the Crown anyloss of tax attributable to his fraudulent or negligent conduct or thefraudulent or negligent conduct of a person acting on his behalf.

(2) Without prejudice to section 43(2) above but subject to section 43B below,where this section applies—

(a) any relevant claim, election, application or notice which could have beenmade or given within the time allowed by the Taxes Acts may be made or givenat any time within one year from the end of the chargeable period in which theassessment is made, and

(b) any relevant claim, election, application or notice previously made orgiven may at any such time be revoked or varied—

(i) in the same manner as it was made or given, and

(ii) by or with the consent of the same person or persons who made, gave orconsented to it (or, in the case of any such person who has died, by or withthe consent of his personal representatives),

except where by virtue of any enactment it is irrevocable.

(3) For the purposes of this section and section 43B below, a claim, election,application or notice is relevant in relation to an assessment for achargeable period if—

(a) it relates to that chargeable period or is made or given by reference toan event occurring in that chargeable period, and

(b) it or, as the case may be, its revocation or variation has or could havethe effect of reducing any of the liabilities mentioned in subsection (4)below.

(4) The liabilities referred to in subsection (3) above are—

(a) the increased liability to tax resulting from the assessment,

(b) any other liability to tax of the person concerned for—

(i) the chargeable period to which the assessment relates, or

(ii) any chargeable period which follows that chargeable period and ends notlater than one year after the end of the chargeable period in which theassessment is made.

(5) Where a claim, election, application or notice is made, given, revoked orvaried by virtue of subsection (2) above, all such adjustments shall be made,whether by way of discharge or repayment of tax or the making of assessmentsor otherwise, as are required to take account of the effect of the taking ofthat action on any person’s liability to tax for any chargeable period.

(6) The provisions of this Act relating to appeals against decisions on claimsshall apply with any necessary modifications to a decision on the revocationor variation of a claim by virtue of subsection (2) above.

43B Limits on application of section 43A.

(1) If the effect of the exercise by any person of a power conferred bysection 43A(2) above—

(a) to make or give a claim, election, application or notice, or

(b) to revoke or vary a claim, election, application or notice previously madeor given,

would be to alter the liability to tax of another person, that power maynot be exercised except with the consent in writing of that other person or,where he has died, his personal representatives.

(2) Where—

(a) a power conferred by subsection (2) of section 43A above is exercised inconsequence of an assessment made on a person, and

(b) the exercise of the power increases the liability to tax of anotherperson,

that section shall not apply by reason of any assessment made because ofthat increased liability.

(3) In any case where—

(a) one or more relevant claims, elections, applications or notices are made,given, revoked or varied by virtue of the application of section 43A above inthe case of an assessment, and

(b) the total of the reductions in liability to tax which, apart from thissubsection, would result from the action mentioned in paragraph (a) abovewould exceed the additional liability to tax resulting from the assessment,

the excess shall not be available to reduce any liability to tax.

(4) Where subsection (3) above has the effect of limiting either the reductionin a person’s liability to tax for more than one period or the reduction inthe liability to tax of more than one person, the limited amount shall beapportioned between the periods or persons concerned—

(a) except where paragraph (b) below applies, in such manner as may bespecified by the inspector by notice in writing to the person or personsconcerned, or

(b) where the person concerned gives (or the persons concerned jointly give)notice in writing to the inspector within the relevant period, in such manneras may be specified in the notice given by the person or persons concerned.

(5) For the purposes of paragraph (b) of subsection (4) above the relevantperiod is the period of 30 days beginning with the day on which notice underparagraph (a) of that subsection is given to the person concerned or, wheremore than one person is concerned, the latest date on which such notice isgiven to any of them.”

(2) This section shall apply in relation to any assessment notice of which isissued on or after the day on which this Act is passed.

151 Assessment of trustees etc. U.K.

(1) Income tax chargeable in respect of income arising to the trustees of asettlement, or to the personal representatives of a deceased person, may beassessed and charged on and in the name of any one or more of the relevanttrustees or, as the case may be, the relevant personal representatives.

[F243 (2) In this section “the relevant trustees”—

(a) in relation to any income, other than gains treated as arising under Chapter II of Part XIII of the Taxes Act 1988, means the trustees to whom the income arises and any subsequent trustees of the settlement; and

(b) in relation to gains treated as arising under Chapter II of Part XIII of the Taxes Act 1988, means the trustees in the year of assessment in which the gains arise and any subsequent trustees of the settlement;

and “the relevant personal representatives” has a corresponding meaning.]

(3) In this section “personal representatives” has the samemeaning as in section 111 of this Act.

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

Textual Amendments

F243 S. 151(2) substituted (31.7.1998 with effect as mentioned in Sch. 14 para. 7(3)(4)(5) of the amending Act) by 1998 c. 36, s. 86, Sch. 14 para. 6

Distress and poinding etc. U.K.

152 Distress for non-payment of tax. U.K.

(1) Section 61 of the M21 Taxes Management Act 1970 (distress)shall be amended as follows.

(2) In subsection (1), for the words “the collector shall” onwards thereshall be substituted the words “the collector may distrain upon the goods and chattels of the personcharged (in this section referred to as “the person indefault”).”

(3) In subsection (2), for the words from “a collector” to “Commissioners” there shall be substituted the words “a justice of thepeace, on being satisfied by information on oath that there is reasonableground for believing that a person is neglecting or refusing to pay a sumcharged, may issue a warrant in writing authorising a collector to”.

(4) In subsection (4), for the words “neglecting or refusing to pay”there shall be substituted the words “in default”.

(5) In subsection (5)—

(a) for the word “aforesaid” there shall be substituted the words “indefault”,

(b) the words “within the said five days” shall be omitted,

(c) for the words from “two or more inhabitants of the parish” to “sufficient persons” there shall be substituted the words “one or moreindependent persons appointed by the collector”, and

(d) the words from “The costs” to “the collector, and” shall beomitted.

(6) The following subsection shall be added after that subsection—

“(6) The Treasury may by regulations make provision with respect to—

(a) the fees chargeable on or in connection with the levying of distress, and

(b) the costs and charges recoverable where distress has been levied;

and any such regulations shall be made by statutory instrument whichshall be subject to annulment in pursuance of a resolution of the House ofCommons.”

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

Marginal Citations

M21 1970 c. 9.

153 Priority in cases of distraint by others. U.K.

(1) Section 62 of the M22 Taxes Management Act 1970 (priorityof claim for tax) shall be amended as follows.

(2) In subsection (1)—

(a) for the words from the beginning to “shall be” there shall besubstituted the words “If at any time at which any goods or chattelsbelonging to any person (in this section referred to as “the personin default”) are”,

(b) for the word “unless” there shall be substituted the words “theperson in default is in arrears in respect of any such sums as are referredto in subsection (1A) below, the goods or chattels may not be so taken unlesson demand made by the collector”, and

(c) for the words “arrears of tax” onwards there shall be substituted thewords “such sums as have fallen due at or before the date of seizure.”

(3) The following subsection shall be inserted after that subsection—

“(1A) The sums referred to in subsection (1) above are—

(a) sums due from the person in default on account of deductions of income taxfrom emoluments paid during the period of twelve months next before the dateof seizure, being deductions which the person in default was liable to makeunder section 203 of the principal Act (pay as you earn) less the amount ofthe repayments of income tax which he was liable to make during that period;and

(b) sums due from the person in default in respect of deductions required tobe made by him for that period under section 559 of the principal Act(sub-contractors in the construction industry).”

(4) In subsection (2)—

(a) for the words from the beginning to “the collector shall” there shallbe substituted the words “If the sums referred to in subsection (1) aboveare not paid within ten days of the date of the demand referred to in thatsubsection, the collector may”,

(b) for the words “shall proceed” there shall be substituted the words “may proceed”, and

(c) for the words “the tax charged and claimed” there shall besubstituted the words “those sums”.

Marginal Citations

M22 1970 c. 9.

154 Recovery of tax from debtor in Scotland. U.K.

(1) Section 63 of the M23 Taxes Management Act 1970 (recoveryof tax in Scotland) shall be amended as follows.

(2) In subsection (3), for the words “which relates to” onwards thereshall be substituted the words “insofar as it relates to sums due in respect of—

(a) deductions of income tax which any person specified in the application wasliable to make under section 203 of the principal Act (pay as you earn); or

(b) deductions required to be made under section 559 of the principal Act(sub-contractors in the construction industry) by any person specified in theapplication.”

(3) The following subsection shall be added after that subsection—

“(4) In this section references to amounts of tax due and references to sumsdue in respect of deductions include references to amounts which are deemedto be—

(a) amounts of tax which the person is liable to pay by virtue of the Income Tax (Employments) Regulations 1973; or

(b) amounts which the person is liable to pay by virtue of the Income Tax(Sub-Contractors in the Construction Industry)Regulations 1975.”

Marginal Citations

M23 1970 c. 9.

155 Priority in cases of poinding etc. by others in Scotland. U.K.

(1) Section 64 of the Taxes Management Act 1970 (priority of claim for tax inScotland) shall be amended as follows.

(2) In subsection (1)—

(a) for the words from the beginning to “shall be” there shall besubstituted the words “If at any time at which any moveable goods andeffects belonging to any person (in this section referred to as “theperson in default”) are”,

(b) for the word “unless” there shall be substituted the words “theperson in default is in arrears in respect of any such sums as are referredto in subsection (1A) below, the goods and effects may not be so taken unlesson demand made by the collector”, and

(c) for the words “the tax so in arrear” onwards there shall besubstituted the words “such sums as have fallen due at or before the dateof poinding or, as the case may be, other diligence or assignation.”

(3) The following subsection shall be inserted after that subsection—

“(1A) The sums referred to in subsection (1) above are—

(a) sums due from the person in default on account of deductions of income taxfrom emoluments paid during the period of twelve months next before the dateof poinding, being deductions which the person in default was liable to makeunder section 203 of the principal Act (pay as you earn) less the amount ofthe repayments of income tax which he was liable to make during that period;and

(b) sums due from the person in default in respect of deductions required tobe made by him for that period under section 559 of the principal Act(sub-contractors in the construction industry).”

(4) In subsection (2)—

(a) for the words from the beginning to “the tax claimed shall” thereshall be substituted the words “If the sums referred to in subsection (1)above are not paid within ten days of the date of the demand referred to inthat subsection, the sums shall”, and

(b) for the words “proceeding at his instance” there shall be substitutedthe word “proceedings”.

Interest etc. U.K.

156 Interest on overdue tax. U.K.

(1) In section 86 of the M24 Taxes Management Act 1970, forsubsection (3) and the words in subsection (4) preceding the Table there shallbe substituted—

“(3) For the purposes of this section—

(a) the reckonable date in relation to any tax charged by an assessment toincome tax under Schedule E, and

(b) subject to subsection (3A) below, the reckonable date in relation to taxcharged by any other assessment to which this section applies,

is the date on which the tax becomes due and payable.

(3A) Where an appeal has been made against an assessment and any of the taxcharged by the assessment is due and payable on a date later than the dategiven by the Table in subsection (4) below, the reckonable date in relationto the tax so due and payable is the later of—

(a) the date given by that Table, and

(b) the date on which the tax would have been due and payable if there hadbeen no appeal against the assessment (assuming in a case where the tax wouldnot have been charged by the assessment if there had been no appeal that itwas so charged).

(4) The Table referred to in subsection (3A) above is asfollows—”.

(2) In section 55 of that Act—

(a) in subsection (2), for the words “it were” onwards there shall besubstituted the words “there had been no appeal.”,

(b) in subsection (6), for paragraphs (a) and (b) there shall besubstituted—

“(a) in the case of a determination made on an application under subsection (3)above, other than an application made by virtue of subsection (3A) above, thedate on which any tax the payment of which is not so postponed is due andpayable shall be determined as if the tax were charged by an assessment noticeof which was issued on the date of that determination and against which therehad been no appeal; and

(b) in the case of a determination made on an application under subsection (4)above—

(i) the date on which any tax the payment of which ceases to be so postponedis due and payable shall be determined as if the tax were charged by anassessment notice of which was issued on the date of that determination andagainst which there had been no appeal; and

(ii) any tax overpaid shall be repaid.”and

(c) for subsection (9) there shall be substituted—

“(9) On the determination of the appeal—

(a) the date on which any tax payable in accordance with that determinationis due and payable shall, so far as it is tax the payment of which had beenpostponed, or which would not have been charged by the assessment if there hadbeen no appeal, be determined as if the tax were charged by anassessment—

(i) notice of which was issued on the date on which the inspector issues tothe appellant a notice of the total amount payable in accordance with thedetermination, and

(ii) against which there had been no appeal; and

(b) any tax overpaid shall be repaid.”

(3) In section 56(9) of that Act, for the words “amount of” there shallbe substituted the words “amount charged by”.

(4) This section shall apply to tax charged by any assessment notice of whichis issued after 30th July 1982.

Marginal Citations

M24 1970 c. 9.

157 Effect of certain claims on interest. U.K.

(1) In relation to any tax charged by an assessment made under section 252(1)of the Taxes Act 1988 to recover corporation tax that becomes payable as aresult of the making of a claim under section 240 of that Act, the reckonabledate for the purposes of section 86 of the M25 Taxes ManagementAct 1970 (in this section referred to as “section 86”) is the date which is given by paragraph 5 ofthe Table in subsection (4) of that section.

(2) Subsections (3) and (4) below apply in any case where—

(a) there is in any accounting period of a company (in this section referredto as “the later period”) an amount of surplus advance corporationtax, as defined in subsection (3) of section 239 of the Taxes Act 1988, and

(b) pursuant to a claim under the said subsection (3), the whole or any partof that amount is treated for the purposes of the said section 239 asdischarging liability for an amount of corporation tax for an earlieraccounting period (in this section referred to as “the earlier period”), and

(c) if the claim under the said subsection (3) had not been made—

(i) an amount of corporation tax assessed for the earlier period would carryinterest in accordance with section 86, or

(ii) an assessment could have been made under section 252(1) of that Act torecover corporation tax for the earlier period.

(3) In determining the amount of interest payable under section 86 oncorporation tax unpaid for the earlier period, no account shall be taken ofany reduction in the amount of that tax which results from section 239(3) ofthe Taxes Act 1988 except so far as concerns interest for any time after theday following the expiry of nine months from the end of the later period.

(4) Where, but for the claim under section 239(3) of the Taxes Act 1988, anassessment could have been made under section 252(1) of that Act to recovercorporation tax for the earlier period, interest under section 86 shall bechargeable, in relation to any time not later than the day referred to insubsection (3) above, as if the claim had not been made and such an assessmenthad been made.

(5) In relation to interest charged under section 86 by virtue of subsection(4) above, section 69 of the M26 Taxes Management Act 1970shall have effect with the substitution for the words following paragraph (c)of the words “as if it were tax charged and due and payable under anassessment”.

(6) In this section—

(a) subsection (1) above shall have effect where the claim under 240 of theTaxes Act 1988 is made on or after 14th March 1989, and

(b) subsections (2) to (5) above shall have effect where the claim undersection 239(3) of that Act is made on or after that date,

but this section shall not have effect in relation to corporation tax forany accounting period ending after the day which is the appointed day for thepurposes of section 85 of the M27 Finance (No.2) Act 1987.

Marginal Citations

M25 1970 c. 9.

M26 1970 c. 9.

M27 1987 c. 51.

158 Small amounts of interest. U.K.

(1) In the Taxes Management Act 1970—

(a) section 86(6) (remission of interest payable on overdue income tax,capital gains tax or corporation tax where interest would not exceed£30), and

(b) section 87(4) (no interest payable on overdue advance corporation tax orincome tax on company payments where interest would not exceed £30),

shall cease to have effect.

(2) The words “of not less than £25” in—

(a) [F244 section 283(1) of the M28 Taxation of Chargeable Gains Act 1992] (norepayment supplement where overdue repayment of capital gains tax less than£25), and

(b) section 824(1)(a) and (b) and (5) of the Taxes Act 1988 (no repaymentsupplement where overdue repayment of income tax etc. less than £25),

and the words “of not less than £100” in section 825(2) of theTaxes Act 1988 (no repayment supplement where overdue repayment of company taxless than £100) shall cease to have effect.

(3) Paragraph (a) of subsection (1) above shall have effect—

(a) in relation to income tax under Schedule E, where the demand for the taxis made on or after the appointed day, and

(b) in any other case, where the tax is charged by an assessment notice ofwhich is issued on or after the appointed day.

(4) Paragraph (b) of that subsection shall have effect where the tax ischarged by an assessment relating to an accounting period beginning on orafter the appointed day.

(5) Subsection (2) above shall have effect in relation to repayments of taxmade on or after the appointed day.

(6) In this section “the appointed day” means such day as theTreasury may by order made by statutory instrument appoint; and different daysmay be appointed for different enactments or for different purposes of thesame enactment.

Textual Amendments

F244 Words in s. 158(2)(a) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the substituting Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 19(3) (with ss. 60, 101(1), 201(3))

Marginal Citations

M28 1975 c. 45.

[F245 159 Interest on tax in case of failure or error. U.K.

(1) Section 88 of the M29 Taxes Management Act 1970 (intereston tax recovered to make good loss due to taxpayer’s fault) shall be amendedas follows.

(2) In subsection (1), for the words “the fraud, wilful default or neglectof any person” there shall be substituted the words—

“(a) a failure to give a notice, make a return or produce or furnish a documentor other information required by or under the Taxes Acts, or

(b) an error in any information, return, accounts or other document deliveredto an inspector or other officer of the Board,”.

(3) The following subsection shall be added at the end—

“(7) In paragraph (a) of subsection (1) above the reference to a failure to dosomething includes, in relation to anything required to be done at aparticular time or within a particular period, a reference to a failure to doit at that time or within that period; and, accordingly, section 118(2) ofthis Act shall not apply for the purposes of that paragraph.”

(4) This section shall have effect in relation to failures occurring, anderrors in any information or documents delivered, on or after the day on whichthis Act is passed.]

Textual Amendments

F245 S. 159 repealed (29.4.1996 with effect as specified in Sch. 18 para. 17 of the amending Act) by 1996 c. 8, s. 205, Sch. 41 Pt. V(8), note

Marginal Citations

M29 1970 c. 9.

160 Determinations under TMA s. 88. U.K.

[F246 (1) In subsection (1) of section 88 of the Taxes Management Act 1970, for thewords “shall carry” there shall be substituted the words “shall, if aninspector or the Board so determine, carry”.]

[F246 (2) The following section shall be inserted after that section—

88A “ Determinations under section 88.

(1) Notice of a determination under section 88 above shall be served on theperson liable to pay the interest to which it relates and shall specify—

(a) the date on which it is issued,

(b) the amount of the tax which carries interest and the assessment by whichthat tax was charged,

(c) the date when for the purposes of section 88 above that tax ought to havebeen paid, and

(d) the time within which an appeal against the determination may be made.

(2) After the notice of a determination under section 88 above has been servedthe determination shall not be altered except in accordance with this section.

(3) A determination under section 88 above may be made at any time—

(a) within six years after the end of the chargeable period for which the taxcarrying the interest is charged (or, in the case of development land tax, ofthe financial year in which the liability for that tax arose), or

(b) within three years after the date of the final determination of the amountof that tax.

(4) An appeal may be brought against a determination under section 88 aboveand, subject to the following provisions of this section, the provisions ofthis Act relating to appeals shall have effect in relation to an appealagainst such a determination as they have effect in relation to an appealagainst an assessment to tax.

(5) On an appeal against a determination under section 88 above section 50(6)to (8) of this Act shall not apply but the Commissioners may—

(a) if it appears to them that the tax carries no interest under that section,set the determination aside,

(b) if the determination appears to them to be correct, confirm thedetermination, or

(c) if the determination appears to them to be incorrect as to the amount oftax or the date on which the tax ought to have been paid, revise thedetermination accordingly.”]

(3) In section 70 (certificates) of the M30 Taxes ManagementAct 1970, for subsection (3) there shall be substituted—

“(3) A certificate of the inspector or any other officer of the Board that ithas been determined that tax carries interest under section 88 of this Act,together with a certificate of the collector that payment of the interest hasnot been made to him, or, to the best of his knowledge and belief, to anyother collector, or to any person acting on his behalf or on behalf of anothercollector, shall be sufficient evidence—

(a) that interest is chargeable on the tax from the date when for the purposesof section 88 of this Act the tax ought to have been paid, and

(b) that the sum mentioned in the certificate is unpaid and is due to theCrown;

and any document purporting to be such a certificate as is mentioned inthis subsection shall be deemed to be such a certificate unless the contraryis proved.”

[F246 (4) In section 113 of that Act (form of documents), the following subsectionshall be inserted after subsection (1B)—

“(1C) Where an officer of the Board has decided that an amount of tax carriesinterest under section 88 of this Act and has taken the decisions needed forarriving at the date when for the purposes of that section that tax ought tohave been paid, he may entrust to any other officer of the Boardresponsibility for completing the determination procedure, whether by meansinvolving the use of a computer or otherwise, including responsibility forserving notice of the determination on the person liable to the interest.”]

(5) In section 114 of that Act (want of form not to invalidate), after theword “assessment”, in each place where it occurs, there shall be insertedthe words “or determination”.

[F247 (6) In paragraph 5 of Schedule 3 to that Act (rules for assigning proceedingsto Commissioners), the following entry shall be inserted in the first columnafter the entry relating to an appeal against an assessment to capital gainstax— “ An appeal against a determination under section 88 of this Act. ”]

Textual Amendments

F246 S. 160(1)(2)(4) repealed (29.4.1996 with effect as specified in Sch. 18 para. 17 of the amending Act) by 1996 c. 8, s. 205, Sch. 41 Pt. V(8), note

F247 S. 160(6) repealed (29.4.1996 with effect as mentioned in Sch. 22 para. 12 of the amending Act) by 1996 c. 8, s. 205, Sch. 41 Pt. V(12), note

Marginal Citations

M30 1970 c. 9.

[F248 161 Tax carrying interest under TMA ss. 86 and 88. U.K.

The following subsection shall be substituted for section 88(3) of the M31 Taxes Management Act 1970—

“(3) Where it is finally determined that any tax carries interest under thissection, the tax shall carry no interest under section 86 or 86A above (and,accordingly, any interest under either of those sections which has been paidbefore the final determination shall be set off against the amount of theinterest under this section); and for the purposes of this subsection adetermination that tax carries interest is not final until it can no longerbe varied, whether by any Commissioners on appeal or by the order of anycourt.”]

Textual Amendments

F248 S. 161 repealed (29.4.1996 with effect as specified in Sch. 18 para. 17 of the amending Act) by 1996 c. 8, s. 205, Sch. 41 Pt. V(8), note

Marginal Citations

M31 1970 c. 9.

Penalties U.K.

162 Failure to make return. U.K.

(1) Section 93 of the Taxes Management Act 1970 (failure to comply with noticeto make return for income tax or capital gains tax) shall be amended asfollows.

(2) In subsection (1) (initial and daily penalties), for paragraphs (a) and(b) there shall be substituted—

“(a) to a penalty not exceeding £300, and

(b) if the failure continues after a penalty is imposed under paragraph (a)above, to a further penalty or penalties not exceeding £60 for each dayon which the failure continues after the day on which the penalty underparagraph (a) above was imposed (but excluding any day for which a penaltyunder this paragraph has already been imposed).”

(3) The following subsection shall be substituted for subsection (2)—

“(2) If a failure by a person to comply with a notice such as is referred toin subsection (1) above continues after the end of the year of assessmentfollowing that during which it was served then, without prejudice to anypenalty under subsection (1) above, he shall be liable to a penalty of anamount not exceeding so much of the tax with which he is charged (whether forone or for more than one year of assessment) in assessments—

(a) based wholly or partly on any income or chargeable gains that ought tohave been included in the return required by the notice, and

(b) made after the end of the year next following the year of assessment inwhich the notice was served,

as is attributable to the income or chargeable gains that ought to havebeen so included.”

(4) The following subsection shall be substituted for subsection (5)—

“(5) No penalty shall be imposed under subsection (1) above in respect of afailure at any time after the failure has been remedied.”

(5) The following subsection shall be substituted for subsection (7)—

“(7) If the person on whom a notice is served proves that there was no incomeor chargeable gain to be included in the return, the penalty under thissection shall not exceed £100.”

(6) This section shall apply in relation to any failure to comply with anotice served on or after 6th April 1989.

163 Incorrect return, accounts etc. U.K.

(1) In—

(a) section 95(1) of the M32 Taxes Management Act 1970(incorrect return etc. for income tax or capital gains tax), and

(b) section 96(1) of that Act (incorrect return etc. for corporation tax),

for the words “the aggregate” onwards there shall be substituted thewords “the amount of the difference specified in subsection (2) below.”

(2) This section shall apply in relation to returns, statements, declarationsor accounts delivered, made or submitted on or after the day on which this Actis passed.

Marginal Citations

M32 1970 c. 9.

164 Special returns, information etc. U.K.

(1) Section 98 of the Taxes Management Act 1970 (special returns, informationetc.) shall be amended as follows.

(2) In subsection (1) (initial and daily penalties)—

(a) for the word “Where” there shall be substituted the words “Subjectto section 98A below, where”, and

(b) for the words “subsection (3)” onwards there shall be substituted thewords “subsections (3) and (4) below—

(i) to a penalty not exceeding £300, and

(ii) if the failure continues after a penalty is imposed under paragraph (i)above, to a further penalty or penalties not exceeding £60 for each dayon which the failure continues after the day on which the penalty underparagraph (i) above was imposed (but excluding any day for which a penaltyunder this paragraph has already been imposed).”

(3) In subsection (2) (maximum penalty for information given fraudulently ornegligently)—

(a) for the word “Where” there shall be substituted the words “Subjectto section 98A below, where”, and

(b) for the words “ £250, or, in the case of fraud, £500”there shall be substituted “ £3,000”.

(4) The following subsections shall be substituted for subsection (3)—

“(3) No penalty shall be imposed under subsection (1) above in respect of afailure within paragraph (a) of that subsection at any time after the failurehas been remedied.

(4) No penalty shall be imposed under paragraph (ii) of subsection (1) abovein respect of a failure within paragraph (b) of that subsection at any timeafter the failure has been remedied.”

(5) In the Table—

(a) in the first column, in the entry relating to Part III of the M33 Taxes Management Act 1970, the words “, except sections 16 and 24(2)” shall be omitted;

(b) the entries relating to sections 38(5) and 42 of the Taxes Act 1988 shallbe moved from the second column to the appropriate place in the first column;and

(c) the entry relating to section 481(5)(k) of that Act shall be omitted fromthe first column and an entry relating to section 482(2) of that Act shall beinserted at the appropriate place in the second column.

(6) In consequence of the amendment made by subsection (5)(a) above section16(6) of the Taxes Management Act 1970 shall cease to have effect.

(7) This section shall apply in relation to—

(a) any failure to comply with a notice or to furnish information, give acertificate or produce a document or record beginning on or after the day onwhich this Act is passed, and

(b) the furnishing, giving, producing or making of any incorrect information,certificate, document, record or declaration on or after that day.

Marginal Citations

M33 1970 c.9.

165 Special penalties in the case of certain returns. U.K.

(1) The following section shall be inserted after section 98 of the TaxesManagement Act 1970—

“98A Special penalties in the case of certain returns.

(1) Regulations under section 203(2) (PAYE) or 566(1) (sub-contractors) of theprincipal Act may provide that this section shall apply in relation to anyspecified provision of the regulations.

(2) Where this section applies in relation to a provision of regulations, anyperson who fails to make a return in accordance with the provision shall beliable—

(a) to a penalty or penalties of the relevant monthly amount for each month(or part of a month) during which the failure continues, but excluding anymonth after the twelfth or for which a penalty under this paragraph hasalready been imposed, and

(b) if the failure continues beyond twelve months, without prejudice to anypenalty under paragraph (a) above, to a penalty not exceeding so much of theamount payable by him in accordance with the regulations for the year ofassessment to which the return relates as remained unpaid at the end of 19thApril after the end of that year.

(3) For the purposes of subsection (2)(a) above, the relevant monthly amountin the case of a failure to make a return—

(a) where the number of persons in respect of whom particulars should beincluded in the return is fifty or less, is £100, and

(b) where that number is greater than fifty, is £100 for each fifty suchpersons and an additional £100 where that number is not a multiple offifty.

(4) Where this section applies in relation to a provision of regulations, anyperson who fraudulently or negligently makes an incorrect return of a kindmentioned in the provision shall be liable to a penalty not exceeding thedifference between—

(a) the amount payable by him in accordance with the regulations for the yearof assessment to which the return relates, and

(b) the amount which would have been so payable if the return had beencorrect.”

[F249 (2) In relation to a failure to make a return beginning before such day as theTreasury may by order made by statutory instrument appoint, section 98A(2)shall have effect with the substitution of the following paragraph forparagraph (a)—

“(a) to—

(i) a penalty not exceeding twelve times the relevant monthly amount, and

(ii) if the failure continues after a penalty is imposed under sub-paragraph(i) above, a further penalty or penalties of the relevant monthly amount foreach month (or part of a month) during which the failure continues, butexcluding any month after the twelfth or for which a penalty under thissub-paragraph has already been imposed,”.]

Textual Amendments

F249 S. 165(2) repealed (with effect in relation to failures beginning on or after 20.5.1995) by Finance Act 1989 (c. 26, SIF 63:1), ss. 165(2), 187(1), Sch. 17 Pt. VIII Note 7; S.I. 1994/2508, art. 2

166 Assisting in preparation of incorrect return etc. U.K.

(1) The following section shall be substituted for section 99 of the M34 Taxes Management Act 1970—

“99 Assisting in preparation of incorrect return etc.

Any person who assists in or induces the preparation or delivery of anyinformation, return, accounts or other document which—

(a) he knows will be, or is or are likely to be, used for any purpose of tax,and

(b) he knows to be incorrect,

shall be liable to a penalty not exceeding £3,000.”

(2) This section shall apply in relation to assistance and inducementsoccurring on or after the day on which this Act is passed.

Marginal Citations

M34 1970c. 9.

167 Determination of penalties. U.K.

The following sections shall be substituted for section 100 of the M35 Taxes Management Act 1970—

“100 Determination of penalties by officer of Board.

(1) Subject to subsection (2) below and except where proceedings for a penaltyhave been instituted under section 100D below or a penalty has been imposedby the Commissioners under section 53 of this Act, an officer of the Boardauthorised by the Board for the purposes of this section may make adetermination imposing a penalty under any provision of the Taxes Acts andsetting it at such amount as, in his opinion, is correct or appropriate.

(2) Subsection (1) above does not apply where the penalty is a penaltyunder—

(a) section 93(1) above as it has effect before the amendments made by section162 of the Finance Act 1989 or section 93(1)(a) above as it has effect afterthose amendments,

(b) section 94(1) above as it has effect before the substitution made bysection 83 of the Finance (No.2) Act 1987,

(c) section 98(1) above as it has effect before the amendments made by section164 of the Finance Act 1989 or section 98(1)(i) above as it has effect afterthose amendments, or

(d) paragraph (a)(i) of section 98A(2) above as it has effect by virtue ofsection 165(2) of the Finance Act 1989.

(3) Notice of a determination of a penalty under this section shall be servedon the person liable to the penalty and shall state the date on which it isissued and the time within which an appeal against the determination may bemade.

(4) After the notice of a determination under this section has been served thedetermination shall not be altered except in accordance with this section oron appeal.

(5) If it is discovered by an officer of the Board authorised by the Board forthe purposes of this section that the amount of a penalty determined underthis section is or has become insufficient the officer may make adetermination in a further amount so that the penalty is set at the amountwhich, in his opinion, is correct or appropriate.

(6) In any case where—

(a) a determination under this section is of a penalty under section 94(6)above, and

(b) after the determination has been made it is discovered by an officer ofthe Board authorised by the Board for the purposes of this section that theamount which was taken into account as the relevant amount of tax is or hasbecome excessive,

the determination shall be revised so that the penalty is set at theamount which is correct; and, where more than the correct amount has alreadybeen paid, the appropriate amount shall be repaid.

100A Provisions supplementary to section 100.

(1) Where a person who has incurred a penalty has died, a determination undersection 100 above which could have been made in relation to him may be madein relation to his personal representatives, and any penalty imposed onpersonal representatives by virtue of this subsection shall be a debt due fromand payable out of his estate.

(2) A penalty determined under section 100 above shall be due and payable atthe end of the period of thirty days beginning with the date of the issue ofthe notice of determination.

(3) A penalty determined under section 100 above shall for all purposes betreated as if it were tax charged in an assessment and due and payable.

100B Appeals against penalty determinations.

(1) An appeal may be brought against the determination of a penalty undersection 100 above and, subject to the following provisions of this section,the provisions of this Act relating to appeals shall have effect in relationto an appeal against such a determination as they have effect in relation toan appeal against an assessment to tax.

(2) On an appeal against the determination of a penalty under section 100above section 50(6) to (8) of this Act shall not apply but—

(a) in the case of a penalty which is required to be of a particular amount,the Commissioners may—

(i) if it appears to them that no penalty has been incurred, set thedetermination aside,

(ii) if the amount determined appears to them to be correct, confirm thedetermination, or

(iii) if the amount determined appears to them to be incorrect, increase orreduce it to the correct amount,

(b) in the case of any other penalty, the Commissioners may—

(i) if it appears to them that no penalty has been incurred, set thedetermination aside,

(ii) if the amount determined appears to them to be appropriate, confirm thedetermination,

(iii) if the amount determined appears to them to be excessive, reduce it tosuch other amount (including nil) as they consider appropriate, or

(iv) if the amount determined appears to them to be insufficient, increase itto such amount not exceeding the permitted maximum as they considerappropriate.

(3) Without prejudice to section 56 of this Act, an appeal from a decision ofthe Commissioners against the amount of a penalty which has been determinedunder section 100 above or this section shall lie, at the instance of theperson liable to the penalty, to the High Court or, in Scotland, to the Courtof Session as the Court of Exchequer in Scotland; and on that appeal the courtshall have the like jurisdiction as is conferred on the Commissioners byvirtue of this section.

100C Penalty proceedings before Commissioners.

(1) An officer of the Board authorised by the Board for the purposes of thissection may commence proceedings before the General or Special Commissionersfor any penalty to which subsection (1) of section 100 above does not applyby virtue of subsection (2) of that section.

(2) Proceedings under this section shall be by way of information in writing,made to the Commissioners, and upon summons issued by them to the defendant(or defender) to appear before them at a time and place stated in the summons;and they shall hear and decide each case in a summary way.

(3) Any penalty determined by the Commissioners in proceedings under thissection shall for all purposes be treated as if it were tax charged in anassessment and due and payable.

(4) An appeal against the determination of a penalty in proceedings under thissection shall lie to the High Court or, in Scotland, the Court of Session asthe Court of Exchequer in Scotland—

(a) by any party on a question of law, and

(b) by the defendant (or, in Scotland, the defender) against the amount of thepenalty.

(5) On any such appeal the court may—

(a) if it appears that no penalty has been incurred, set the determinationaside,

(b) if the amount determined appears to be appropriate, confirm thedetermination,

(c) if the amount determined appears to be excessive, reduce it to such otheramount (including nil) as the court considers appropriate, or

(d) if the amount determined appears to be insufficient, increase it to suchamount not exceeding the permitted maximum as the court considers appropriate.

100D Penalty proceedings before court.

(1) Where in the opinion of the Board the liability of any person for apenalty arises by reason of the fraud of that or any other person, proceedingsfor the penalty may be instituted before the High Court or, in Scotland, theCourt of Session as the Court of Exchequer in Scotland.

(2) Proceedings under this section which are not instituted (in England, Walesor Northern Ireland) under the Crown Proceedings Act 1947by and in the name of the Board as an authorised department for the purposesof that Act shall be instituted—

(a) in England and Wales, in the name of the Attorney General,

(b) in Scotland, in the name of the Lord Advocate, and

(c) in Northern Ireland, in the name of the Attorney General for NorthernIreland.

(3) Any proceedings under this section instituted in England and Wales shallbe deemed to be civil proceedings by the Crown within the meaning of Part IIof the Crown Proceedings Act 1947 and any such proceedings instituted inNorthern Ireland shall be deemed to be civil proceedings within the meaningof that Part of that Act as for the time being in force in Northern Ireland.

(4) If in proceedings under this section the court does not find that fraudis proved but consider that the person concerned is nevertheless liable to apenalty, the court may determine a penalty notwithstanding that, but for theopinion of the Board as to fraud, the penalty would not have been a matter forthe court.”

Marginal Citations

M35 1970 c. 9.

168 Amendments consequential on section 167. U.K.

(1) In consequence of the amendment made by section 167 above the M36 Taxes Management Act 1970 shall be amended in accordance withsubsections (2) to (8) below.

(2) In section 20A (power to call for papers of tax accountant)—

(a) in subsection (1), for the words “awarded against him a penalty incurredby” there shall be substituted the words “a penalty imposed on”,

(b) in subsection (2), for the word “award” in the first place where itoccurs there shall be substituted the word “penalty” and for that wordin the second place where it occurs there shall be substituted the word “imposition”, and

(c) in subsection (4), for the words “award against” there shall besubstituted the words “imposition on” and for the word “award” thereshall be substituted the word “penalty”.

F250 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In section 102 (mitigation of penalties), for the words “recoverythereof” there shall be substituted the words “a penalty”.

(5) In section 105 (evidence)—

(a) the following paragraph shall be substituted for paragraph (a) ofsubsection (1)—

“(a) pecuniary settlements may be accepted instead of a penalty beingdetermined, or proceedings being instituted, in relation to any tax,”,

(b) in paragraph (b) of subsection (2), for the words “sum” onwards thereshall be substituted the words “tax due from him”, and

(c) after that paragraph there shall be inserted the words “and

(c) any proceedings for a penalty or on appeal against the determination ofa penalty.”

(6) In section 112 (loss of documents etc.), the following subsection shallbe added at the end—

“(3) The references in subsection (1) above to assessments to tax includereferences to determinations of penalties; and in its application to suchdeterminations the proviso to that subsection shall have effect with theappropriate modifications.”

(7) In section 113 (form of documents)—

(a) the following subsection shall be inserted after subsection (1C)—

“(1D) Where an officer of the Board has decided to impose a penalty undersection 100 of this Act and has taken all other decisions needed for arrivingat the amount of the penalty, he may entrust to any other officer of the Boardresponsibility for completing the determination procedure, whether by meansinvolving the use of a computer or otherwise, including responsibility forserving notice of the determination on the person liable to the penalty.”and

(b) in subsection (3)—

(i) after the words “Every assessment,” there shall be inserted the words “determination of a penalty,”,

(ii) after the words “notice of assessment” there shall be inserted thewords “, of determination”, and

(iii) after the words “levying tax” there shall be inserted the words “ordetermining a penalty”.

[F251 (8) In paragraph 5 of Schedule 3 (rules for assigning proceedings toCommissioners), for the words “section 100(4)” there shall be substitutedthe words “section 100C or an appeal under section 100B against thedetermination of a penalty”.]

(9) In section 41 of the M37 Development Land Tax Act 1976(administration of development land tax) the following subsection shall beinserted after subsection (1)—

“(1A) Nothing in sections 167 to 169 of the Finance Act 1989 shall apply topenalties relating to development land tax.”

Textual Amendments

F250 S. 168(3) repealed (1.9.1994) by S.I. 1994/1813, reg. 2(2), Sch. 2 Pt. I

F251 S. 168(8) repealed (29.4.1996 with effect as mentioned in Sch. 22 para. 12 of the amending Act) by 1996 c. 8, s. 205, Sch. 41 Pt. V(12), note

Marginal Citations

M36 1970 c.9.

M37 1976 c. 24.

169 Time limits. U.K.

(1) The following section shall be substituted for section 103 of the M38 Taxes Management Act 1970—

“103 Time limits for penalties.

(1) Subject to subsection (2) below, where the amount of a penalty is to beascertained by reference to tax payable by a person for any period, thepenalty may be determined by an officer of the Board, or proceedings for thepenalty may be commenced before the Commissioners or a court—

(a) at any time within six years after the date on which the penalty wasincurred, or

(b) at any later time within three years after the final determination of theamount of tax by reference to which the amount of the penalty is to beascertained.

(2) Where the tax was payable by a person who has died, and the determinationwould be made in relation to his personal representatives, subsection (1)(b)above does not apply if the tax was charged in an assessment made later thansix years after the end of the chargeable period for which it was charged.

(3) A penalty under section 99 of this Act may be determined by an officer ofthe Board, or proceedings for such a penalty may be commenced before a court,at any time within twenty years after the date on which the penalty wasincurred.

(4) A penalty to which neither subsection (1) nor subsection (3) above appliesmay be so determined, or proceedings for such a penalty may be commencedbefore the Commissioners or a court, at any time within six years after thedate on which the penalty was incurred or began to be incurred.”

(2) The amendment made by subsection (1) above shall not affect theapplication of section 103(4) of the M39 Taxes Management Act1970 to proceedings under section 100 of that Act as it has effect before theamendment made by section 167 above.

Marginal Citations

M38 1970c. 9.

M39 1970 c. 9.

170 Up-rating of certain penalties. U.K.

[F252 (1) In section 23(8) of the Taxes Act 1988 (maximum penalty for agents failing to make certain payments on behalf of principals), for “£50” there shall be substituted “£300”.]

F253 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In section 306(6) of that Act (maximum penalty for false certificates or statements relating to investment in corporate trades), for the words “£250 or, in the case of fraud, £500” there shall be substituted “£3,000”.

(4) In—

(a) section 619(7) of that Act (maximum penalty for false statements or representations relating to relief for qualifying premiums),

(b) section 653 of that Act (maximum penalty for statements or representations about personal pension schemes), and

(c) section 658(5) of that Act (maximum penalty for false statements or representations relating to purchased life annuities),

for “£500” there shall be substituted “£3,000”.

(5) In paragraph 2(4) of Schedule 19A to that Act and Schedule 16A to the M40 Finance Act 1973 (maximum penalty for incorrect return byLloyd’s agent), for the words “£500 in the case of fraud and £250 in the case of negligence” there shall be substituted “£3,000”.

(6) This section shall apply in relation to things done or omitted on or after the day on which this Act is passed.

Textual Amendments

F252 S. 170(1) repealed (1.5.1995 with effect as mentioned in s. 39(4)(5) of the amending Act) by 1995 c. 4, s. 162, Sch. 29 Pt. VIII(1), note

F253 S. 170(2) repealed (16.7.1992 with effect in accordance with s. 32 of the repealing Act) by Finance (No. 2) Act 1992 (c. 48), ss. 32, 82, Sch. 18 Pt. VII(4)

Marginal Citations

M40 1973 c. 51.