Finance Act 1989

Part II U.K. Amendments Connected with Repeal of Chapter III of Part XI of Taxes Act1988

The Taxes Management Act 1970 (c.9) U.K.

5 U.K. In the first column of the Table in section 98 of the Taxes Management Act1970 (penalty for failure to give particulars etc.) there shall be added atthe end— “ Paragraphs 2 to 4 of Schedule 12 to the Finance Act 1989. ”

The Capital Gains Tax Act 1979 (c.14) U.K.

6 (1) In section 136 of the Capital Gains Tax Act 1979 (relief in respect ofloans to traders) in subsection (10)(b) for the words “paragraph 7 ofSchedule 19 to the Taxes Act 1988” there shall be substituted the words “paragraph 1 of Schedule 20 to the M1 Finance Act 1985”.

(2) This paragraph shall have effect where the claim under section 136 is madeafter 31st March 1989.

Marginal Citations

M1 1985 c. 54.

The Income and Corporation Taxes Act 1988 (c.1) U.K.

7 U.K. In section 13 of the Taxes Act 1988 (small companies’ rate) in subsection(9) for the words “paragraph 17 of Schedule 19” there shall besubstituted the words “paragraphs 2 to 4 of Schedule 12 to the Finance Act1989”.

8 (1) In section 168(11) of the Taxes Act 1988 (cases in which a person has amaterial interest in a company for the purposes of Chapter II of Part V ofthat Act) for the words from “in a company” to the end of paragraph (b)there shall be substituted— “in a company if he, either on his own or with one or more associates,or if any associate of his with or without such other associates,— U.K.

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

(b) in the case of a close company, possesses, or is entitled to acquire, suchrights as would, in the event of the winding-up of the company or in any othercircumstances, give an entitlement to receive more than 5 per cent. of theassets which would then be available for distribution among the participators.”and at the end there shall be added the words “ , and “participator” has the meaning given by section 417(1) ”.

(2) This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

9 (1) In section 187(3) of the Taxes Act 1988 (cases in which a person has amaterial interest in a company for the purposes of sections 185 to 187 of, andSchedules 9 and 10 to, that Act) for the words from “in a company” to theend of paragraph (b) there shall be substituted— “in a company if he, either on his own or with one or more associates,or if any associate of his with or without such other associates,— U.K.

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

(b) where the company is a close company, possesses, or is entitled toacquire, such rights as would, in the event of the winding-up of the companyor in any other circumstances, give an entitlement to receive more than 25 percent., or in the case of a share option scheme which is not a savings-relatedshare option scheme more than 10 per cent., of the assets which would then beavailable for distribution among the participators.”and at the end there shall be added the words “ and “participator” has the meaning given by section 417(1) ”.

(2) This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

10 (1) In section 214 of the Taxes Act 1988 (chargeable payments connected withexempt distributions) in subsection (1)(c) for the words from “338(2)(a)”to “Schedule 19” there shall be substituted the words “and338(2)(a)”. U.K.

(2) This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989, except in any case where section 427(4) ofthe Taxes Act 1988 has effect by virtue of section 103(2) of this Act.

11 U.K. In section 234 of the Taxes Act 1988 (information relating todistributions) in subsection (9) for the words from “paragraph 17” to “that Schedule” there shall be substituted the words “paragraphs 2 to4 of Schedule 12 to the Finance Act 1989 for the purposes of the relevantprovisions (as defined in paragraph 1 of that Schedule)”.

12 (1) Section 360 of the Taxes Act 1988 (loan to buy interest in a closecompany) shall be amended in accordance with this paragraph. U.K.

(2) In subsection (1)(a) for the words from “satisfying” to “424(4)”there shall be substituted the words “complying with section 13A(2)”.

(3) In subsections (2)(a) and (3)(a) for the words “satisfy any of theconditions of section 424(4)” there shall be substituted the words “comply with section 13A(2)”.

(4) This paragraph shall have effect in relation to interest paid on or afterthe day on which this Act is passed (and, accordingly, the conditions ofsection 424(4) of the Taxes Act 1988 shall continue to have effect for thepurposes of section 360 of that Act in relation to interest paid before thatday).

13 (1) Section 360A of the Taxes Act 1988 (cases in which a person has a materialinterest in a company for the purposes of section 360(2)(a)) shall be amendedin accordance with this paragraph. U.K.

(2) In subsection (1) for the words from “in a company” onwards thereshall be substituted— “in a company if he, either on his own or with one or more associates,or if any associate of his with or without such other associates,—

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

(b) possesses, or is entitled to acquire, such rights as would, in the eventof the winding-up of the company or in any other circumstances, give anentitlement to receive more than 5 per cent. of the assets which would thenbe available for distribution among the participators.”

(3) In subsection (10) after the word “section” there shall be insertedthe words “ “participator” has the meaning given by section 417(1)and”.

(4) This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

14 (1) In section 576 of the Taxes Act 1988 (which relates to relief for losseson certain unquoted shares) in subsection (5), for paragraph (a) of thedefinition of “trading company” there shall be substituted— U.K.

“(a) a company whose business consists wholly or mainly of the carrying on ofa trade or trades”.

(2) This paragraph shall have effect in relation to disposals made after 31stMarch 1989.

15 (1) In section 623 of the Taxes Act 1988 (meaning of “relevant earnings” for the purposes of Chapter III of PartXIV of that Act) in subsection (2) for the words “(construed in accordancewith paragraph 7 of Schedule 19)” there shall be substituted the words “(that is to say, income which, if the company were an individual, would notbe earned income)”. U.K.

(2) This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

16 (1) In section 644 of the Taxes Act 1988 (meaning of “relevant earnings” for the purposes of Chapter IV of PartXIV of that Act) in subsection (6) for the definition of “investmentincome” there shall be substituted— U.K.

““investment income” means income which, if the company werean individual, would not be earned income.”

(2) This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

17 U.K. In section 745 of the Taxes Act 1988 (power to obtain information for thepurposes of Chapter III of Part XVII of that Act) in subsection (4) for thewords from “trading” onwards there shall be substituted the words “companies whose business consists wholly or mainly of the carrying on ofa trade or trades.”

18 (1) Paragraph 7 of Schedule 8 to the Taxes Act 1988 (cases in which a personhas a material interest in a company for the purposes of a profit-related payscheme) shall be amended in accordance with this paragraph. U.K.

(2) In sub-paragraph (2) for the words from “in a company” onwards thereshall be substituted— “in a company if he, either on his own or with one or more associates,or if any associate of his with or without such other associates,—

(a) is the beneficial owner of, or able, directly or through the medium ofother companies, or by any other indirect means to control, more than 25 percent. of the ordinary share capital of the company, or

(b) in the case of a close company, possesses, or is entitled to acquire, suchrights as would, in the event of the winding-up of the company or in any othercircumstances, give an entitlement to receive more than 25 per cent. of theassets which would then be available for distribution among the participators”.

(3) In sub-paragraph (3) the second “and” shall be omitted and after thedefinition of “control” there shall be inserted “and

“participator” has the meaning given by section 417(1)”.

(4) This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.