Finance Act 1989

SCHEDULES

Section 6.

SCHEDULE 1 U.K. Vehicles Excise Duty: Rates

F1 Part I U.K.

Textual Amendments

F1 Sch. 1 Pt. I repealed (1.9.1994) by 1994 c. 22, ss. 65, 66(1), Sch. 5 Pt. I (with s. 57(4))

Part II F2 U.K.

Textual Amendments

F2 S. 6(3)(4), Sch. 1 Pt. II, Sch. 2 para. 3 repealed byFinance Act 1990 (c. 29, SIF 58), s. 132, Sch. 19 Pt. II Note 3

Section 8.

SCHEDULE 2 U.K. Vehicles Excise Duty: Special Machines

F3 1 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F3 Sch. 2 paras. 1, 2, 4 repealed (1.9.1994) by 1994 c. 22, ss. 65, 66(1), Sch. 5 Pt. I (with s. 57(4))

F4 2 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F4 Sch. 2 paras. 1, 2, 4 repealed (1.9.1994) by 1994 c. 22, ss. 65, 66(1), Sch. 5 Pt. I (with s. 57(4))

3F5 U.K.

Textual Amendments

F5 S. 6(3)(4), Sch. 1 Pt. II, Sch. 2 para. 3 repealed byFinance Act 1990 (c. 29, SIF 58), s. 132, Sch. 19 Pt. II Note 3

F6 4 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Sch. 2 paras. 1, 2, 4 repealed (1.9.1994) by 1994 c. 22, ss. 65, 66(1), Sch. 5 Pt. I (with s. 57(4))

F7 SCHEDULE 3 U.K.

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

Textual Amendments

F7 Sch. 3 repealed (1.9.1994) by 1994 c. 23, ss. 100(2), 101(1), Sch. 15

Section 61.

SCHEDULE 4 U.K. Profit-Related Pay

1 The Taxes Act 1988 shall be amended in accordance with the followingprovisions of this Schedule.

2 (1) In section 171(4) (limit on pay of which half may be exempt from tax) for “£3,000” there shall be substituted “£4,000”.

(2) This paragraph shall have effect in relation to profit-related pay paidby reference to profit periods beginning on or after 1st April 1989.

3 After section 177 there shall be inserted—

“177A Death of scheme employer.

“177A (1) Where a scheme employer has died, his personal representatives may makea written application to the Board under this section for the amendment of theregistration of the scheme.

(2) If on receiving an application under this section the Board are satisfiedthat, apart from the death of the scheme employer, there would be no groundsfor cancelling the registration of the scheme, the Board shall amend theregistration of the scheme by substituting the personal representatives forthe deceased scheme employer.

(3) An application under this section shall be made before the end of theperiod of one month beginning with the date of the grant of probate or lettersof administration or, in Scotland, confirmation of executors.

(4) Where the Board amend the registration of a scheme under this section,this Chapter shall (subject to any necessary modifications) have effect as ifthe personal representatives had been the scheme employer throughout.

(5) The Board shall give notice to the personal representatives if they refusean application under this section.

177B Alteration of scheme’s terms.

177B (1) The alteration of the terms of a registered scheme shall not of itselfinvalidate the registration of the scheme.

(2) Subsection (1) above is without prejudice to the power of cancellationconferred on the Board by section 178(3A); but the power conferred by section178(3A) shall not be exercisable by virtue of an alteration registered inaccordance with this section.

(3) Where the terms of a registered scheme have been altered, the schemeemployer may apply to the Board for the registration of the alteration.

(4) An application under subsection (3) above—

(a) shall be in such form as the Board may prescribe;

(b) shall be made within the period of one month beginning with the day onwhich the alteration is made;

(c) shall contain a declaration by the applicant that the alteration is withinsubsection (8) below and that the scheme as altered complies with therequirements of Schedule 8 (either as that Schedule had effect when the schemewas registered, or as it then had effect but subject to one or more subsequentamendments specified in the declaration);

(d) shall be accompanied by a report by an independent accountant, in a formprescribed by the Board, to the effect that in his opinion the alteration iswithin subsection (8) below and the scheme as altered complies with therequirements of Schedule 8 (either as that Schedule had effect when the schemewas registered, or as it then had effect but subject to one or more subsequentamendments specified in the report).

(5) The Board shall not more than three months after the day on which theyreceive an application under subsection (3) above either register thealteration or refuse the application; and in either case they shall givenotice of their decision to the applicant.

(6) Subject to subsection (7) below, the Board shall register an alterationon an application under subsection (3) above.

(7) The Board may refuse an application under subsection (3) above if they arenot satisfied—

(a) that the application complies with the requirements of subsection (4)above, or

(b) that the declaration referred to in subsection (4)(c) above is true.

(8) An alteration is within this subsection if—

(a) it relates to a term which is not relevant to the question whether thescheme complies with the requirements of Schedule 8; or

(b) it relates to a term identifying any person (other than the schemeemployer) who pays the emoluments of employees to whom the scheme relates; or

(c) it consists of the addition of a term making provision for an abbreviatedprofit period of the kind referred to in paragraph 10(3) of Schedule 8; or

(d) it amends the provisions by reference to which the employees to whom thescheme relates may be identified, and does so only for the purposes of profitperiods which begin after the date on which the alteration is made; or

(e) it relates to a provision of a kind referred to in paragraph 13(4) or (5)or 14(3), (4) or (5) of Schedule 8 (as those provisions have effect at thetime of the application for registration of the alteration), and has effectonly for the purposes of profit periods beginning after the date on which thealteration is made; or

(f) it amends the provisions as to when payments will be made to employees,and does so only for the purposes of profit periods beginning after the dateon which the alteration is made; or

(g) the scheme did not comply with the requirements of Schedule 8 when it wasregistered, and the alteration—

(i) is made in order to bring the scheme into compliance with the requirementsof that Schedule (either as it had effect when the scheme was registered oras it has effect at the time of the application for registration of thealteration), and

(ii) is made for the purposes of the first and any subsequent profit period towhich the scheme relates, and

(iii) is made within two years of the beginning of the first profit period, and

(iv) does not invalidate (in whole or in part) any payment of profit-relatedpay already made under the scheme.”

4 (1) Section 178 (cancellation of registration) shall be amended as follows.

(2) In subsection (1) for the words “subsection (5)” there shall besubstituted the words “subsections (5) and (5A)”.

(3) After subsection (3) there shall be inserted—

“(3A) Where the terms of a registered scheme have been altered, then, subjectto section 177B(2), the Board may cancel the registration of the scheme witheffect from the beginning of the profit period during which the alterationtook effect or with effect from the beginning of any later profit period.

(3B) If after an alteration of the terms of a scheme has been registered undersection 177B it appears to the Board—

(a) that the application for registration of the alteration did not complywith the requirements of subsection (4) of that section, or

(b) that the declaration referred to in subsection (4)(c) of that section wasfalse,

the Board may cancel the registration of the scheme with effect from thebeginning of the profit period during which the alteration took effect or witheffect from the beginning of any later profit period.”

(4) After subsection (5) there shall be inserted—

“(5A) Where—

(a) the scheme employer has died, and

(b) his personal representatives by notice request the Board to cancel theregistration of the scheme with effect from the date of death,

then, if the notice is given before the end of the period of one monthbeginning with the date of the grant of probate or letters of administrationor, in Scotland, confirmation of executors, the Board shall comply with therequest.”

5 At the end of section 179 (recovery of tax) there shall be added—

“(3) Where—

(a) the scheme employer has died, but

(b) his personal representatives have not been substituted for him as thescheme employer by virtue of section 177A,

the reference in subsection (2) above to the scheme employer shall beconstrued as a reference to the personal representatives.

(4) Where—

(a) a payment to which this section applies was made by a person other thanthe scheme employer, and

(b) the scheme employer is not resident in the United Kingdom,

then in relation to that payment the reference in subsection (2) aboveto the scheme employer shall include a reference to the person by whom thepayment was made.”

6 At the end of section 180 (annual returns) there shall be added—

“(5) Where—

(a) the scheme employer has died, but

(b) his personal representatives have not been substituted for him as thescheme employer by virtue of section 177A,

the reference in subsection (1) above to the scheme employer shall beconstrued as a reference to the personal representatives.”

7 At the end of section 181 (information) there shall be added—

“(4) Where the scheme employer has died, his personal representatives shallinform the Board of his death by notice given before the end of the period ofone month beginning with the date of the grant of probate or letters ofadministration or, in Scotland, confirmation of executors.”

8 (1) Section 182 (appeals) shall be amended as follows.

(2) In subsection (1) after paragraph (b) there shall be inserted—

“(bb) against a refusal by the Board of an application under section 177B(3);”.

(3) After subsection (1) there shall be inserted—

“(1A) An appeal to the Special Commissioners may be made by the personalrepresentatives of a scheme employer against a refusal by the Board of anapplication under section 177A.”

(4) In subsection (2) for the words “scheme employer” there shall besubstituted the word “appellant”.

9 (1) Paragraph 7 of Schedule 8 (no payments for employees with materialinterest in company) shall be amended as follows.

(2) In sub-paragraph (1), the words “, or is an associate of a person who has,” shall be omitted.

(3) In sub-paragraph (3), after the words “section 417(3) and (4)” thereshall be inserted the words “, but subject to sub-paragraph (4) below”.

(4) The following sub-paragraphs shall be added at the end—

“(4) For the purposes of this paragraph, where an employee of a company has aninterest in shares or obligations of the company as a beneficiary of anemployee benefit trust, the trustees shall not be regarded as associates ofhis by reason only of that interest unless sub-paragraph (8) below applies inrelation to him.

(5) A trust is an employee benefit trust for the purposes of this paragraphif—

(a) all or most of the employees of the company are eligible to benefit underit, and

(b) none of the property subject to it has been disposed of on or after 14thMarch 1989 (whether by sale, loan or otherwise) except in the ordinary courseof management of the trust or in accordance with sub-paragraph (6) below.

(6) Property is disposed of in accordance with this sub-paragraph if—

(a) it is applied for the benefit of—

(i) individual employees or former employees of the company,

(ii) spouses, former spouses, widows or widowers of employees or formeremployees of the company,

(iii) relatives, or spouses of relatives, of persons within sub-paragraph (i)or (ii) above, or

(iv) dependants of persons within sub-paragraph (i) above,

(b) it is applied for charitable purposes, or

(c) it is transferred to the trustees of an approved profit sharing scheme(within the meaning of section 187), of another employee benefit trust, or ofa qualifying employee share ownership trust (within the meaning of Schedule5 to the Finance Act 1989),

and the property applied or transferred consists of any of the ordinaryshare capital of the company or of money paid outright.

(7) In sub-paragraph (6)(a)(iii) above “relative” means parent or remoter forebear, child or remoterissue, brother, sister, uncle, aunt, nephew or niece.

(8) This sub-paragraph applies in relation to an employee if at any time onor after 14th March 1989—

(a) the employee, 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 mediumof other companies or by any other indirect means) to control, more than 25per cent. of the ordinary share capital of the company.

(9) Where—

(a) on or after 14th March 1989 an employee of a company, or an associate ofhis, receives a payment (“the relevant payment”) from the trustees of anemployee benefit trust, and

(b) at any time during the period of three years ending with the day on whichthe relevant payment is received, the property subject to the trust consistsof or includes any part of the ordinary share capital of the company,

the employee or associate shall be treated for the purposes ofsub-paragraph (8) above as if he were the beneficial owner of the appropriatepercentage of the ordinary share capital of the company on the day on whichthe relevant payment is received (in addition to any percentage of that sharecapital of which he is actually the beneficial owner on that day).

(10) For the purposes of sub-paragraph (9) above, the appropriate percentageis—

where—

• A is the smaller of—

  • (a) the aggregate of the relevant payment and any other paymentsreceived by the employee or associates of his from the trustees of the trustduring the period of 12 months ending with the day on which the relevant payment is received, and

  • (b) the aggregate of the distributions made to the trustees of the trustby the company in respect of its ordinary share capital during the period ofthree years ending with the day on which the relevant payment is received; and

• B is the aggregate of—

  • (a) any distributions made by the company in respect of its ordinaryshare capital during the period of 12 months ending with the day on which therelevant payment is received,

  • (b) any distributions so made during the period of 12 months immediatelypreceding that mentioned in paragraph (a) above, and

  • (c) any distributions so made during the period of 12 months immediately preceding that mentioned in paragraph (b) above,

divided by the number of the periods mentioned in paragraphs (a) to(c) above in which distributions were so made.

(11) Where—

(a) an employee or associate is treated by sub-paragraph (9) above as if hewere the beneficial owner of a percentage of the ordinary share capital of acompany by reason of receiving the relevant payment from the trustees of atrust, and

(b) that employee, or an associate of his, has, during the period of 12 monthsending with the day on which the relevant payment is received, received oneor more payments from trustees of another employee benefit trust or trustssatisfying the requirement in paragraph (b) of sub-paragraph (9) above,

that sub-paragraph shall have effect in relation to the employee orassociate mentioned in paragraph (a) above as if he had received the paymentfrom the trustees of the trust or of each of the trusts mentioned in paragraph(b) above (or where more than one payment has been received from the trusteesof a trust, the last of the payments) on the day on which the relevant paymentis received.

(12) In sub-paragraphs (8) to (11) above “associate”, in relation to an employee, does not include thetrustees of an employee benefit trust by reason only that the employee has aninterest in shares or obligations of the trust.”

10 (1) Paragraphs 13(2) and 14(2) of Schedule 8 (which provide for a scheme’sdistributable pool to be at least 5 per cent. of the pay of all the employeesto whom the scheme relates if profits remain unchanged) shall be omitted.

(2) In consequence of sub-paragraph (1) above—

(a) the following provisions shall be omitted—

• section 175(3);

• in section 176(1), the words “(but not more than six months)”;

• section 178(2)(b);

• in paragraph 13(1) of Schedule 8, the word “fixed”;

• paragraph 13(3) of that Schedule;

• paragraph 14(7) of that Schedule.

(b) in paragraph 13 of Schedule 8—

(i) after sub-paragraph (1) there shall be inserted—

“(1A) That percentage must be a fixed percentage specified in the scheme and,if the scheme relates to more than one period, must be the same for eachperiod.”;

(ii) in sub-paragraph (4)(a), for the words “the base year referred to insub-paragraph (3) above” there shall be substituted the words “a baseyear specified in the scheme”;

(iii) in sub-paragraph (5), for the words “must be” onwards there shall besubstituted the words “must not exceed the profits for a base year specifiedin the scheme”;

(iv) for sub-paragraph (6), there shall be substituted—

“(6) The base year referred to in sub-paragraph (4)(a) and sub-paragraph (5)above must be a period of 12 months ending at a time within the period of twoyears immediately preceding the profit period, or the first of the profitperiods, to which the scheme relates”;

(c) in paragraph 14(5) of that Schedule, for the words “must be” onwardsthere shall be substituted the words “must not exceed the profits in theperiod of 12 months immediately preceding the first or only profit period towhich the scheme relates”.

11 At the end of paragraph 13 of Schedule 8 (calculation of distributablepool by method A) there shall be added—

“(7) Any provision included in a scheme by virtue of sub-paragraph (4) or (5)above may take effect either from the scheme’s first profit period or from anylater profit period determined in accordance with the scheme.”

12 In paragraph 14 of Schedule 8 (calculation of distributable pool by methodB), in sub-paragraph (5) the words “specified in, or” shall be omitted.

13 At the end of paragraph 14 of Schedule 8 there shall be added—

“(8) Any provision included in a scheme by virtue of sub-paragraph (3)(b), (4)or (5) above may take effect either from the scheme’s first profit period orfrom any later profit period determined in accordance with the scheme.”

14 (1) Paragraph 19 of Schedule 8 (profit and loss account for purposes ofprofit-related pay scheme) shall be amended as follows.

(2) After sub-paragraph (4) (account to make no allowance for remuneration ofpersons excluded from scheme) there shall be inserted—

“(4A) In sub-paragraph (4) above “remuneration”, in relation to a person, includes fees andpercentages, any sums paid by way of expenses allowance (insofar as those sumsare charged to income tax), any contributions paid in respect of him under anypension scheme and the estimated value of any other benefits received by himotherwise than in cash.”

(3) In sub-paragraph (6) (items which may be left out of account in arrivingat profits or losses) for paragraph (f) there shall be substituted—

“(f) profit-related pay payable under the scheme, and profit-related paypayable under any other registered scheme if it is one to which paragraph 21below applies;

(ff) secondary Class 1 contributions under Part I of the Social Security Act 1975 or Part I of the SocialSecurity (Northern Ireland) Act 1975 in respect of profit-related pay payableunder the scheme;”.

15 After paragraph 20 of Schedule 8 there shall be inserted—

“ Parts of undertakings

21 (1) This paragraph shall apply to a scheme if the employment unit is a partof an undertaking, and the scheme states that the profits or losses of theunit are for the purposes of the scheme to be taken to be equivalent to thoseof the whole undertaking (which must be identified by the scheme).

(2) Where this paragraph applies to a scheme, this Schedule shall have effectas if any reference to the profits or losses of the employment unit were areference to the profits or losses of the undertaking of which it forms part.

22 (1) Where paragraph 21 above applies to a scheme, the scheme must containprovisions ensuring that no payments are made under it by reference to aprofit period unless, at the beginning of that profit period,—

(a) there is at least one other registered scheme which relates to employeesemployed in the same undertaking as that of which the employment unit formspart, and

(b) the number of the employees to whom the scheme relates does not exceed 33per cent. of the number of the employees to whom that other scheme relates (orif there is more than one other scheme, the aggregate number of the employeesto whom they relate).

(2) Another registered scheme shall be disregarded for the purposes ofsub-paragraph (1) above—

(a) if paragraph 21 above applies to it, or

(b) if, by virtue of provisions of the kind described in paragraph 6 above,no payments could be made under it by reference to the profit periodconcerned.

(3) Where paragraph 21 above applies to two or more schemes relating toemployment units which are parts of the same undertaking, an employee to whomanother scheme relates shall not be counted for the purposes of sub-paragraph(1)(b) above in connection with more than one of those schemes.”

Section 74.

SCHEDULE 5 U.K. Employee Share Ownership Trusts

Modifications etc. (not altering text)

C1 Sch. 5 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the applying Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 228(7), 235(8), 289 (with ss. 60, 101(1), 171, 201(3))

Qualifying trusts U.K.

1 U.K. A trust is a qualifying employee share ownership trust at the time it isestablished if the conditions set out in paragraphs 2 to 11 below aresatisfied in relation to the trust at that time.

Modifications etc. (not altering text)

C2 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

General U.K.

2 (1) The trust must be established under a deed (the trust deed). U.K.

(2) The trust must be established by a company (the founding company) which,at the time the trust is established, is resident in the United Kingdom andnot controlled by another company.

Modifications etc. (not altering text)

C3 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

Trustees U.K.

3 (1) The trust deed must provide for the establishment of a body of trustees. U.K.

(2) The trust deed must—

(a) appoint the initial trustees;

(b) contain rules for the retirement and removal of trustees;

(c) contain rules for the appointment of replacement and additional trustees.

(3) The trust deed must provide that at any time while the trust subsists (therelevant time)—

(a) the number of trustees must not be less than three;

(b) all the trustees must be resident in the United Kingdom;

(c) the trustees must include one person who is a trust corporation, asolicitor, or a member of such other professional body as the Board may fromtime to time allow for the purposes of this paragraph;

(d) most of the trustees must be persons who are not and have never beendirectors of any company which falls within the founding company’s group atthe relevant time;

(e) most of the trustees must be persons who are employees of companies whichfall within the founding company’s group at the relevant time, and who do nothave and have never had a material interest in any such company;

(f) the trustees falling within paragraph (e) above must, before beingappointed as trustees, have been selected by a majority of the employees ofthe companies falling within the founding company’s group at the time of theselection or by persons elected to represent those employees.

(4) For the purposes of sub-paragraph (3) above a company falls within thefounding company’s group at a particular time if—

(a) it is the founding company, or

(b) it is at that time resident in the United Kingdom and controlled by thefounding company.

[F8 (5) This paragraph applies in relation to trusts established on or before the day on which the Finance Act 1994 was passed.]

Textual Amendments

F8 Sch. 5 para. 3(5) inserted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 2

Modifications etc. (not altering text)

C4 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

C5 Schedule 5 para. 3(3)(c) amended (1.1.1992) by S.I. 1991/2684, arts. 2(1), 4, Sch. 1

[F9 3A U.K. Where a trust is established after the day on which the Finance Act 1994 was passed, the trust deed must make provision as mentioned in one of paragraphs (a) to (c) below—

(a) provision for the establishment of a body of trustees and complying with paragraph 3(2) to (4) above;

(b) provision for the establishment of a body of trustees and complying with paragraph 3B(2) to (9) below;

(c) provision that at any time while the trust subsists there must be a single trustee.]

Textual Amendments

F9 Sch. 5 paras. 3A-3C inserted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 3

F10 3B (1) The following are the provisions that must be complied with under paragraph 3A(b) above. U.K.

(2) The trust deed must—

(a) appoint the initial trustees;

(b) contain rules for the retirement and removal of trustees;

(c) contain rules for the appointment of replacement and additional trustees.

(3) The trust deed must be so framed that at any time while the trust subsists the conditions set out in sub-paragraph (4) below are fulfilled as regards the persons who are then trustees; and in that sub-paragraph “the relevant time” means that time.

(4) The conditions are that—

(a) the number of trustees is not less than three;

(b) all the trustees are resident in the United Kingdom;

(c) the trustees include at least one person who is a professional trustee and at least two persons who are non-professional trustees;

(d) at least half of the non-professional trustees were, before being appointed as trustees, selected in accordance with sub-paragraph (7) or (8) below;

(e) all the trustees so selected are persons who are employees of companies which fall within the founding company’s group at the relevant time, and who do not have and have never had a material interest in any such company.

(5) For the purposes of this paragraph a trustee is a professional trustee at a particular time if—

(a) the trustee is then a trust corporation, a solicitor, or a member of such other professional body as the Board may at that time allow for the purposes of this sub-paragraph,

(b) the trustee is not then an employee or director of any company then falling within the founding company’s group, and

(c) the trustee meets the requirements of sub-paragraph (6) below;

and for the purposes of this paragraph a trustee is a non-professional trustee at a particular time if the trustee is not then a professional trustee for those purposes.

(6) A trustee meets the requirements of this sub-paragraph if—

(a) he was appointed as an initial trustee and, before being appointed as trustee, was selected by (and only by) the persons who later became the non-professional initial trustees, or

(b) he was appointed as a replacement or additional trustee and, before being appointed as trustee, was selected by (and only by) the persons who were the non-professional trustees at the time of the selection.

(7) Trustees are selected in accordance with this sub-paragraph if the process of selection is one under which—

(a) all the persons who are employees of the companies which fall within the founding company’s group at the time of the selection, and who do not have and have never had a material interest in any such company, are (so far as is reasonably practicable) given the opportunity to stand for selection,

(b) all the employees of the companies falling within the founding company’s group at the time of the selection are (so far as is reasonably practicable) given the opportunity to vote, and

(c) persons gaining more votes are preferred to those gaining less.

(8) Trustees are selected in accordance with this sub-paragraph if they are selected by persons elected to represent the employees of the companies falling within the founding company’s group at the time of the selection.

(9) For the purposes of this paragraph a company falls within the founding company’s group at a particular time if—

(a) it is at that time resident in the United Kingdom, and

(b) it is the founding company or it is at that time controlled by the founding company.

Textual Amendments

F10 Sch. 5 paras. 3A-3C inserted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 3

F11 3C (1) This paragraph applies where the trust deed provides that at any time while the trust subsists there must be a single trustee. U.K.

(2) The trust deed must—

(a) be so framed that at any time while the trust subsists the trustee is a company which at that time is resident in the United Kingdom and controlled by the founding company;

(b) appoint the initial trustee;

(c) contain rules for the removal of any trustee and for the appointment of a replacement trustee.

(3) The trust deed must be so framed that at any time while the trust subsists the company which is then the trustee is a company so constituted that the conditions set out in sub-paragraph (4) below are then fulfilled as regards the persons who are then directors of the company; and in that sub-paragraph “the relevant time” is that time and “the trust company” is that company.

(4) The conditions are that—

(a) the number of directors is not less than three;

(b) all the directors are resident in the United Kingdom;

(c) the directors include at least one person who is a professional director and at least two persons who are non-professional directors;

(d) at least half of the non-professional directors were, before being appointed as directors, selected in accordance with sub-paragraph (7) or (8) below;

(e) all the directors so selected are persons who are employees of companies which fall within the founding company’s group at the relevant time, and who do not have and have never had a material interest in any such company.

(5) For the purposes of this paragraph a director is a professional director at a particular time if—

(a) the director is then a solicitor or a member of such other professional body as the Board may at that time allow for the purposes of this sub-paragraph,

(b) the director is not then an employee of any company then falling within the founding company’s group,

(c) the director is not then a director of any such company (other than the trust company), and

(d) the director meets the requirements of sub-paragraph (6) below;

and for the purposes of this paragraph a director is a non-professional director at a particular time if the director is not then a professional director for those purposes.

(6) A director meets the requirements of this sub-paragraph if—

(a) he was appointed as an initial director and, before being appointed as director, was selected by (and only by) the persons who later became the non-professional initial directors, or

(b) he was appointed as a replacement or additional director and, before being appointed as director, was selected by (and only by) the persons who were the non-professional directors at the time of the selection.

(7) Directors are selected in accordance with this sub-paragraph if the process of selection is one under which—

(a) all the persons who are employees of the companies which fall within the founding company’s group at the time of the selection, and who do not have and have never had a material interest in any such company, are (so far as is reasonably practicable) given the opportunity to stand for selection,

(b) all the employees of the companies falling within the founding company’s group at the time of the selection are (so far as is reasonably practicable) given the opportunity to vote, and

(c) persons gaining more votes are preferred to those gaining less.

(8) Directors are selected in accordance with this sub-paragraph if they are selected by persons elected to represent the employees of the companies falling within the founding company’s group at the time of the selection.

(9) For the purposes of this paragraph a company falls within the founding company’s group at a particular time if—

(a) it is at that time resident in the United Kingdom, and

(b) it is the founding company or it is at that time controlled by the founding company.

Textual Amendments

F11 Sch. 5 paras. 3A-3C inserted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 3

Beneficiaries U.K.

4 (1) The trust deed must contain provision as to the beneficiaries under thetrust, in accordance with the following rules.

(2) The trust deed must provide that a person is a beneficiary at a particulartime (the relevant time) if—

(a) he is at the relevant time an employee or director of a company which atthat time falls within the founding company’s group,

(b) at each given time in a qualifying period he was an employee or directorof a company falling within the founding company’s group at that given time,and

(c) [F12 in the case of a director, at that given time he worked as a] director of the companyconcerned at the rate of at least 20 hours a week (ignoring such matters asholidays and sickness).

(3) The trust deed may provide that a person is a beneficiary at a particulartime (the relevant time) if—

(a) he has at each given time in a qualifying period been an employee ordirector of a company falling within the founding company’s group at thatgiven time,

(b) he has ceased to be an employee or director of the company or the companyhas ceased to fall within that group, and

(c) at the relevant time a period of not more than eighteen months has elapsedsince he so ceased or the company so ceased (as the case may be).

(4) The trust deed may provide for a person to be a beneficiary if the personis a charity and the circumstances are such that—

(a) there is no person who is a beneficiary within any rule which is includedin the deed and conforms with sub-paragraph (2) or (3) above, and

(b) the trust is in consequence being wound up.

(5) For the purposes of sub-paragraph (2) above a qualifying period is aperiod—

(a) whose length is not less than one year and not more than five years,

(b) whose length is specified in the trust deed, and

(c) which ends with the relevant time (within the meaning of thatsub-paragraph).

(6) For the purposes of sub-paragraph (3) above a qualifying period is aperiod—

(a) whose length is equal to that of the period specified in the trust deedfor the purposes of a rule which conforms with sub-paragraph (2) above, and

(b) which ends when the person or company (as the case may be) ceased asmentioned in sub-paragraph (3)(b) above.

(7) The trust deed must not provide for a person to be a beneficiary unlesshe falls within any rule which is included in the deed and conforms withsub-paragraph (2), (3) or (4) above.

(8) The trust deed must provide that, notwithstanding any other rule which isincluded in it, a person cannot be a beneficiary at a particular time (therelevant time) if—

(a) at that time he has a material interest in the founding company, or

(b) at any time in the period of one year preceding the relevant time he hashad a material interest in that company.

(9) For the purposes of this paragraph a company falls within the foundingcompany’s group at a particular time if—

(a) it is at that time resident in the United Kingdom, and

(b) it is the founding company or it is at that time controlled by thefounding company.

(10) For the purposes of this paragraph a charity is a body of personsestablished for charitable purposes only.

Textual Amendments

F12 Words in Sch. 5 para. 4(2)(c) substituted (1.5.1995 with effect as mentioned in s. 137(9) of the amending Act) by 1995 c. 4, s. 137(5)

Modifications etc. (not altering text)

C6 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

Trustees’ functions U.K.

5 (1) The trust deed must contain provision as to the functions of the trustees.

(2) The functions of the trustees must be so expressed that it is apparentthat their general functions are—

(a) to receive sums from the founding company and other sums (by way of loanor otherwise);

(b) to acquire securities;

(c) to transfer securities or sums (or both) to persons who are beneficiariesunder the terms of the trust deed;

(d) to transfer securities to the trustees of profit sharing schemes approvedunder Schedule 9 to the Taxes Act 1988, for a price not less than the pricethe securities might reasonably be expected to fetch on a sale in the openmarket;

(e) pending transfer, to retain the securities and to manage them (whether byexercising voting rights or otherwise).

Modifications etc. (not altering text)

C7 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

Sums U.K.

6 (1) The trust deed must require that any sum received by the trustees— U.K.

(a) must be expended within the relevant period,

(b) may be expended only for one or more of the qualifying purposes, and

(c) must, while it is retained by them, be kept as cash or be kept in anaccount with a bank or building society.

(2) For the purposes of sub-paragraph (1) above the relevant period is theperiod of nine months beginning with the day found as follows—

(a) in a case where the sum is received from the founding company, or acompany which is controlled by that company at the time the sum is received,the day following the end of the period of account in which the sum is chargedas an expense of the company from which it is received;

(b) in any other case, the day the sum is received.

(3) For the purposes of sub-paragraph (1) above each of the following is aqualifying purpose—

(a) the acquisition of shares in the founding company;

(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 termsof the trust deed;

(e) the meeting of expenses.

(4) The trust deed must provide that, in ascertaining for the purposes of arelevant rule whether a particular sum has been expended, sums receivedearlier by the trustees shall be treated as expended before sums received bythem later; and a relevant rule is one which is included in the trust deed andconforms with sub-paragraph (1) above.

(5) The trust deed must provide that, where the trustees pay sums to differentbeneficiaries at the same time, all the sums must be paid on similar terms.

(6) For the purposes of sub-paragraph (5) above, the fact that terms varyaccording to the levels of remuneration of beneficiaries, the length of theirservice, or similar factors, shall not be regarded as meaning that the termsare not similar.

Modifications etc. (not altering text)

C8 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

Securities U.K.

7 (1) Subject to paragraph 8 below, the trust deed must provide that securitiesacquired by the trustees must be shares in the founding company which— U.K.

(a) form part of the ordinary share capital of the company,

(b) are fully paid up,

(c) are not redeemable, and

(d) are not subject to any restrictions other than restrictions which attachto all shares of the same class or a restriction authorised by sub-paragraph(2) below.

(2) Subject to sub-paragraph (3) below, a restriction is authorised by thissub-paragraph if—

(a) it is imposed by the founding company’s articles of association,

(b) it requires all shares held by directors or employees of the foundingcompany, or of any other company which it controls for the time being, to bedisposed of on ceasing to be so held, and

(c) it requires all shares acquired, in pursuance of rights or interestsobtained by such directors or employees, by persons who are not (or haveceased to be) such directors or employees to be disposed of when they areacquired.

(3) A restriction is not authorised by sub-paragraph (2) above unless—

(a) any disposal required by the restriction will be by way of sale for aconsideration in money on terms specified in the articles of association, and

(b) the articles also contain general provisions by virtue of which any persondisposing of shares of the same class (whether or not held or acquired asmentioned in sub-paragraph (2) above) may be required to sell them on termswhich are the same as those mentioned in paragraph (a) above.

(4) The trust deed must provide that shares in the founding company may notbe acquired by the trustees at a price exceeding the price they mightreasonably be expected to fetch on a sale in the open market.

(5) The trust deed must provide that shares in the founding company may notbe acquired by the trustees at a time when that company is controlled byanother company.

Modifications etc. (not altering text)

C9 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

8 U.K. The trust deed may provide that the trustees may acquire securities otherthan shares in the founding company—

(a) if they are securities issued to the trustees in exchange in circumstancesmentioned in section [F13 135(1) of the M9 Taxation of Chargeable Gains Act1992], or

(b) if they are securities acquired by the trustees as a result of areorganisation, and the original shares the securities represent are sharesin the founding company (construing “reorganisation” and “originalshares” in accordance with section [F13 126] of that Act).

Textual Amendments

F13 Words in Sch. 5 para. 8 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(5) (with s. 60, 101(1), 201(3))

Modifications etc. (not altering text)

C10 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

Marginal Citations

M9 1992 c. 12.

9 (1) The trust deed must provide that—

(a) where the trustees transfer securities to a beneficiary, they must do soon qualifying terms;

(b) the trustees must transfer securities before the expiry of the [F14 qualifying period] beginning with the date on which they acquired them.

(2) For the purposes of sub-paragraph (1) above a transfer of securities ismade on qualifying terms if—

(a) all the securities transferred at the same time are transferred on similarterms,

(b) securities have been offered to all the persons who are beneficiariesunder the terms of the trust deed when the transfer is made, and

(c) securities are transferred to all such beneficiaries who have accepted.

[F15 (2A) For the purposes of sub-paragraph (1) 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.]

(3) For the purposes of sub-paragraph (2) above, the fact that terms varyaccording to the levels of remuneration of beneficiaries, the length of theirservice, or similar factors, shall not be regarded as meaning that the termsare not similar.

(4) The trust deed must provide that, in ascertaining for the purposes of arelevant rule whether particular securities are transferred, securitiesacquired earlier by the trustees shall be treated as transferred by thembefore securities acquired by them later; and a relevant rule is one which isincluded in the trust deed and conforms with sub-paragraph (1) above.

Textual Amendments

F14 Words in Sch. 5 para. 9(1)(b) substituted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 7(2)

F15 Sch. 5 para. 9(2A) inserted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 7(3)

Modifications etc. (not altering text)

C11 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

Other features U.K.

10 The trust deed must not contain features which are not essential orreasonably incidental to the purpose of acquiring sums and securities,transferring sums and securities to employees and directors, and transferringsecurities to the trustees of profit sharing schemes approved under Schedule9 to the Taxes Act 1988.

Modifications etc. (not altering text)

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

Rules about acquisition etc. U.K.

11 (1) The trust deed must provide that, for the purposes of the deed, thetrustees— U.K.

(a) acquire securities when they become entitled to them;

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

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

(2) But if the deed provides as mentioned in paragraph 8 above, it mustprovide for the following exceptions to any rule which is included in it andconforms with sub-paragraph (1)(a) above, namely, that—

(a) if securities are issued to the trustees in exchange in circumstancesmentioned in section [F16 135(1) of the M10 Taxation of Chargeable Gains Act 1992], they shall be treated as having acquired them when they became entitledto the securities for which they are exchanged;

(b) if the trustees become entitled to securities as a result of areorganisation, they shall be treated as having acquired them when they becameentitled to the original shares which those securities represent (construing “reorganisation” and “original shares” in accordance with section [F16 126] of that Act).

(3) The trust deed must provide that—

(a) if the trustees agree to take a transfer of securities, for the purposesof the deed they become entitled to them when the agreement is made and noton a later transfer made pursuant to the agreement;

(b) if the trustees agree to transfer securities to another person, for thepurposes of the deed the other person becomes entitled to them when theagreement is made and not on a later transfer made pursuant to the agreement.

Textual Amendments

F16 Words in Sch. 5 para. 11 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(5) (with s. 60, 101(1), 201(3))

Modifications etc. (not altering text)

C13 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

Marginal Citations

M10 1992 c. 12.

Position after trust’s establishment U.K.

12 U.K. A trust which was at the time it was established a qualifying employeeshare ownership trust shall continue to be one, except that it shall not besuch a trust at any time when the requirements mentioned in paragraph 3(3)(a)to (f) above are not satisfied. [F17 This paragraph applies in relation to trusts established on or before the day on which the Finance Act 1994 was passed.]

Textual Amendments

F17 Words in Sch. 5 para. 12 inserted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 4

Modifications etc. (not altering text)

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

[F18 12A (1) Subject to sub-paragraphs (2) and (3) below, a trust which was at the time it was established a qualifying employee share ownership trust shall continue to be one. U.K.

(2) If the trust deed makes provision under paragraph 3A(a) above, the trust shall not be a qualifying employee share ownership trust at any time when the requirements mentioned in paragraph 3(3)(a) to (f) above are not satisfied.

(3) If the trust deed makes provision under paragraph 3A(b) above, the trust shall not be a qualifying employee share ownership trust at any time when the conditions mentioned in paragraph 3B(4)(a) to (e) above are not satisfied.

(4) If the trust deed makes provision under paragraph 3A(c) above, the trust shall not be a qualifying employee share ownership trust at any time when—

(a) there is not a single trustee,

(b) the trustee is not a company which is resident in the United Kingdom and controlled by the founding company, or

(c) the conditions mentioned in paragraph 3C(4)(a) to (e) above are not satisfied as regards the directors of the trustee.

(5) This paragraph applies in relation to trusts established after the day on which the Finance Act 1994 was passed.]

Textual Amendments

F18 Sch. 5 para. 12A inserted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 5

13 U.K. A trust is an employee share ownership trust at a particular time (therelevant time) if it was a qualifying employee share ownership trust at thetime it was established; and it is immaterial whether or not it is aqualifying employee share ownership trust at the relevant time.

Modifications etc. (not altering text)

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

Interpretation U.K.

14 U.K. For the purposes of this Schedule the following are securities—

(a) shares;

(b) debentures.

Modifications etc. (not altering text)

C16 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

15 U.K. For the purposes of this Schedule, the question whether one company iscontrolled by another shall be construed in accordance with section 840 of theTaxes Act 1988.

Modifications etc. (not altering text)

C17 See Finance Act 1990 (c. 29) ss.31–40—roll-over relief for disposal of shares to employeeshare ownership trusts

16 (1) For the purposes of this Schedule a person shall be treated as having amaterial interest in a company if he, either on his own or with one or moreof his associates, or if any associate of his with or without other suchassociates,— 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) 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.

(2) In this paragraph—

(a) “associate” has the same meaning as in section 417(3) and (4)of the Taxes Act 1988, but subject to sub-paragraph (3) below,

(b) “control” has the meaning given by section 840 of that Act,and

(c) “participator” has the same meaning as in Part XI of thatAct.

(3) Where a person has an interest in shares or obligations of the company asa beneficiary of an employee benefit trust, the trustees shall not be regardedas associates of his by reason only of that interest unless sub-paragraph (5)below applies in relation to him.

(4) In sub-paragraph (3) above “employee benefit trust” hasthe same meaning as in paragraph 7 of Schedule 8 to the Taxes Act 1988, exceptthat in its application for this purpose paragraph 7(5)(b) of that Scheduleshall have effect as if it referred to the day on which this Act was passedinstead of to 14th March 1989.

(5) This sub-paragraph applies in relation to a person if at any time on orafter the day on which this Act was passed—

(a) he, 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 mediumof other companies or by any other indirect means) to control, more than 5 percent. of the ordinary share capital of the company.

(6) Sub-paragraphs (9) to (12) of paragraph 7 of Schedule 8 to the Taxes Act1988 shall apply for the purposes of sub-paragraph (5) above as they apply forthe purposes of that paragraph.

Modifications etc. (not altering text)

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

[F19 17 U.K. For the purposes of this Schedule a trust is established when the deed under which it is established is executed.]

Textual Amendments

F19 Sch. 5 para. 17 inserted (3.5.1994) by 1994 c. 9, s. 102, Sch. 13 para. 8

Section 75.

SCHEDULE 6 U.K. Retirement Benefits Schemes

Part I U.K. Amendments of Taxes Act

Preliminary U.K.

1 U.K. The Taxes Act 1988 shall be amended as mentioned in the followingprovisions of this Part of this Schedule.

Amendments U.K.

F20 2 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F20 Sch. 6 para. 2 repealed (1.5.1995 with effect in accordance with Sch. 8 para. 57 of the amending Act) by 1995 c. 4, s. 162, Sch. 29 Pt. VIII(5), note 2

3 (1) Section 590 (conditions for approval of schemes) shall be amended asfollows. U.K.

(2) In subsection (3)(d) (condition to be satisfied as to lump sum) the words “(disregarding any excess of that remuneration over the permittedmaximum)” shall be omitted.

(3) In subsection (3) for the words from “In paragraph (d) above” to theend there shall be substituted—

“(e) that, in the case of any employee who is a member of the scheme by virtueof two or more relevant associated employments, the amount payable by way ofpension in respect of service in any one of them may not, when aggregated withany amount payable by way of pension in respect of service in the other orothers, exceed the relevant amount;

(f) that, in the case of any employee who is a member of the scheme by virtueof two or more relevant associated employments, the amount payable by way ofcommuted pension in respect of service in any one of them may not, whenaggregated with any amount payable by way of commuted pension in respect ofservice in the other or others, exceed the relevant amount;

(g) that, in the case of any employee in relation to whom the scheme isconnected with another scheme which is (or other schemes each of which is) anapproved scheme, the amount payable by way of pension under the scheme maynot, when aggregated with any amount payable by way of pension under the otherscheme or schemes, exceed the relevant amount;

(h) that, in the case of any employee in relation to whom the scheme isconnected with another scheme which is (or other schemes each of which is) anapproved scheme, the amount payable by way of commuted pension may not, whenaggregated with any amount payable by way of commuted pension under the otherscheme or schemes, exceed the relevant amount.”

(4) For subsection (7) there shall be substituted—

“(7) Subsections (8) to (10) below apply where the Board are consideringwhether a retirement benefits scheme satisfies or continues to satisfy theprescribed conditions.

(8) For the purpose of determining whether the scheme, so far as it relatesto a particular class or description of employees, satisfies or continues tosatisfy the prescribed conditions, that scheme shall be considered inconjunction with—

(a) any other retirement benefits scheme (or schemes) which relates (orrelate) to employees of that class or description and which is (or are)approved for the purposes of this Chapter,

(b) any other retirement benefits scheme (or schemes) which relates (orrelate) to employees of that class or description and which is (or are) at thesame time before the Board in order for them to decide whether to giveapproval for the purposes of this Chapter,

(c) any section 608 scheme or schemes relating to employees of that class ordescription, and

(d) any relevant statutory scheme or schemes relating to employees of thatclass or description.

(9) If those conditions are satisfied in the case of both or all of thoseschemes taken together, they shall be taken to be satisfied in the case of thescheme mentioned in subsection (7) above (as well as the other or others).

(10) If those conditions are not satisfied in the case of both or all of thoseschemes taken together, they shall not be taken to be satisfied in the caseof the scheme mentioned in subsection (7) above.

(11) The reference in subsection (8)(c) above to a section 608 scheme is areference to a fund to which section 608 applies.”

4 U.K. The following sections shall be inserted after section 590—

“590A Section 590: supplementary provisions.

(1) For the purposes of section 590(3)(e) and (f) two or more employments arerelevant associated employments if they are employments in the case ofwhich—

(a) there is a period during which the employee has held both or all of them,

(b) the period counts under the scheme in the case of both or all of them asa period in respect of which benefits are payable, and

(c) the period is one during which both or all of the employers in questionare associated.

(2) For the purposes of section 590(3)(g) and (h) the scheme is connected withanother scheme in relation to an employee if—

(a) there is a period during which he has been the employee of two persons whoare associated employers,

(b) the period counts under both schemes as a period in respect of whichbenefits are payable, and

(c) the period counts under one scheme by virtue of service with one employerand under the other scheme by virtue of service with the other employer.

(3) For the purposes of subsections (1) and (2) above, employers areassociated if (directly or indirectly) one is controlled by the other or ifboth are controlled by a third person.

(4) In subsection (3) above the reference to control, in relation to a bodycorporate, shall be construed—

(a) where the body corporate is a close company, in accordance with section416, and

(b) where it is not, in accordance with section 840.

590B Section 590: further supplementary provisions.

(1) For the purposes of section 590(3)(e) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(2) For the purposes of section 590(3)(f) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(3) For the purposes of section 590(3)(g) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(4) For the purposes of section 590(3)(h) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(5) For the purposes of this section A is the aggregate number of yearsservice (expressing parts of a year as a fraction), subject to a maximum of40, which, in the case of the employee, count for the purposes of the schemeat the time the benefits in respect of service in the employment becomepayable.

(6) But where the same year (or part of a year) counts for the purposes of thescheme by virtue of more than one of the relevant associated employments itshall be counted only once in calculating the aggregate number of yearsservice for the purposes of subsection (5) above.

(7) For the purposes of this section B is the aggregate number of yearsservice (expressing parts of a year as a fraction), subject to a maximum of40, which, in the case of the employee, count for the purposes of any of thefollowing—

(a) the scheme, and

(b) the other scheme or schemes with which the scheme is connected in relationto him,

at the time the benefits become payable.

(8) But where the same year (or part of a year) counts for the purposes ofmore than one scheme it shall be counted only once in calculating theaggregate number of years service for the purpose of subsection (7) above.

(9) For the purposes of this section C is the permitted maximum in relationto the year of assessment in which the benefits in question become payable,that is, the figure found for that year by virtue of subsections (10) and (11)below.

(10) For the years 1988-89 and 1989-90 the figure is £60,000.

(11) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).

590C Earnings cap.

(1) In arriving at an employee’s final remuneration for the purposes ofsection 590(3)(a) or (d), any excess of what would be his final remuneration(apart from this section) over the permitted maximum for the year ofassessment in which his participation in the scheme ceases shall bedisregarded.

(2) In subsection (1) above “the permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of subsections (3) and (4)below.

(3) For the years 1988-89 and 1989-90 the figure is £60,000.

(4) For any subsequent year of assessment the figure is also £60,000,subject to subsection (5) below.

(5) If the retail prices index for the month of December preceding a year ofassessment falling within subsection (4) above is higher than it was for theprevious December, the figure for that year shall be an amount arrived atby—

(a) increasing the figure for the previous year of assessment by the samepercentage as the percentage increase in the retail prices index, and

(b) if the result is not a multiple of £600, rounding it up to thenearest amount which is such a multiple.

(6) The Treasury shall in the year of assessment 1989-90, and in eachsubsequent year of assessment, make an order specifying the figure which isby virtue of this section the figure for the following year of assessment.”

5 (1) Section 592 (exempt approved schemes) shall be amended as follows. U.K.

(2) In subsection (8) there shall be inserted at the beginning the words “Subject to subsection (8A) below,”.

(3) After subsection (8) there shall be inserted—

“(8A) Where an employee’s remuneration for a year of assessment includesremuneration in respect of more than one employment, the amount allowed to bededucted by virtue of subsection (7) above in respect of contributions paidby the employee in that year by virtue of any employment (whether under asingle scheme or under two or more schemes) shall not exceed 15 per cent, orsuch higher percentage as the Board may in a particular case prescribe, of hisremuneration for the year in respect of that employment.”

(4) After subsection (8A) there shall be inserted—

“(8B) In arriving at an employee’s remuneration for a year of assessment for thepurposes of subsection (8) or (8A) above, any excess of what would be hisremuneration (apart from this subsection) over the permitted maximum for thatyear shall be disregarded.

(8C) In subsection (8B) above “permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of subsections (8D) and (8E)below.

(8D) For the year 1989-90 the figure is £60,000.

(8E) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).”

6 (1) Section 594 (exempt statutory schemes) shall be amended as follows. U.K.

(2) In subsection (1) the word “relevant” shall be inserted before the words “statutoryscheme”.

(3) In subsection (2) there shall be inserted at the beginning the words “Subject to subsection (3) below,”.

(4) After subsection (2) there shall be inserted—

“(3) Where a person’s remuneration for a year of assessment includesremuneration in respect of more than one office or employment, the amountallowed to be deducted by virtue of subsection (1) above in respect ofcontributions paid by the person in that year by virtue of any office oremployment (whether under a single scheme or under two or more schemes) shallnot exceed 15 per cent, or such higher percentage as the Board may in aparticular case prescribe, of his remuneration for the year in respect of thatoffice or employment.”

(5) After subsection (3) there shall be inserted—

“(4) In arriving at a person’s remuneration for a year of assessment for thepurposes of subsection (2) or (3) above, any excess of what would be hisremuneration (apart from this subsection) over the permitted maximum for thatyear shall be disregarded.

(5) In subsection (4) above “permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of subsections (6) and (7)below.

(6) For the year 1989-90 the figure is £60,000.

(7) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).”

7 U.K. Section 595(2) and (3) (charge to tax in certain cases) shall be omitted.

8 (1) Section 596 (exceptions from section 595) shall be amended as follows. U.K.

(2) In subsection (1)—

(a) for the words “Neither subsection (1) nor subsection (2) of section 595shall” there shall be substituted the words “Section 595(1) shallnot”; and

(b) in paragraph (b) the word “relevant” shall be inserted before thewords “statutory scheme”.

(3) In subsection (2) for the words “Neither subsection (1) nor subsection(2) of section 595 shall” there shall be substituted the words “Section595(1) shall not”.

(4) In subsection (3)(a) the words “either” and “or subsection (2)” shall be omitted.

9 U.K. The following section shall be inserted after section 596—

“596A Charge to tax: benefits under non-approved schemes.

(1) Where in any year of assessment a person receives a benefit provided undera retirement benefits scheme which is not of a description mentioned insection 596(1) (a), (b) or (c), tax shall be charged in accordance with theprovisions of this section.

(2) Where the benefit is received by an individual, he shall be charged to taxunder Schedule E for that year.

(3) Where the benefit is received by a person other than an individual, theadministrator of the scheme shall be charged to tax under Case VI of ScheduleD for that year.

(4) The amount to be charged to tax is—

(a) in the case of a cash benefit, the amount received, and

(b) in the case of a benefit in kind, an amount equal to whatever is the cashequivalent of the benefit.

(5) In the case of the charge under Case VI of Schedule D, the rate of tax is40 per cent. or such other rate (whether higher or lower) as may for the timebeing be specified by the Treasury by order.

(6) Tax shall not be charged under this section in the case of a benefit whichis chargeable to tax under Schedule E by virtue of section 19(1)1.

(7) But where the amount chargeable to tax by virtue of section 19(1)1 is lessthan the amount which would be chargeable to tax under this section—

(a) subsection (6) above shall not apply, and

(b) the amount chargeable to tax under this section shall be reduced by theamount chargeable to tax by virtue of section 19(1)1.

(8) Tax shall not be charged under this section to the extent that the benefitreceived is attributable to the payment of a sum—

(a) which is deemed to be the income of a person by virtue of section 595(1),and

(b) in respect of which that person has been assessed to tax.

(9) For the purpose of subsection (8) above the provision of a benefit shallbe presumed not to be attributable to the payment of such a sum as ismentioned in that subsection unless the contrary is shown.

596B Section 596A: supplementary provisions.

(1) For the purposes of section 596A the cash equivalent of a benefit in kindis—

(a) in the case of a benefit other than living accommodation, the amount whichwould be the cash equivalent of the benefit under Chapter II of Part V if itwere chargeable under the appropriate provision of that Chapter (treating anysum made good by the recipient as made good by the employee), and

(b) in the case of living accommodation, an amount equal to the value of theaccommodation to the recipient determined in accordance with the followingprovisions of this section less so much of any sum made good by him to thoseat whose cost the accommodation is provided as is properly attributable to theprovision of the accommodation.

(2) Where the cost of providing the accommodation does not exceed£75,000, the value of the accommodation to the recipient in any periodis the rent which would have been payable for the period if the premises hadbeen let to him at an annual rent equal to their annual value as ascertainedunder section 837.

(3) But for a period in which those at whose cost the accommodation isprovided pay rent at an annual rate greater than the annual value as soascertained, the value of the accommodation to the recipient is an amountequal to the rent payable by them for the period.

(4) Where the cost of providing the accommodation does exceed £75,000,the value of the accommodation to the recipient shall be taken to be theaggregate of the value of the accommodation to him determined in accordancewith subsections (2) and (3) above and the additional value of theaccommodation to him determined in accordance with subsections (5) and (6)below.

(5) The additional value of the accommodation to the recipient in any periodis the rent which would have been payable for that period if the premises hadbeen let to him at an annual rent equal to the appropriate percentage of theamount by which the cost of providing the accommodation exceeds £75,000.

(6) Where throughout the period of six years ending with the date when therecipient first occupied the property any estate or interest in the propertywas held by a relevant person (whether or not it was the same estate, interestor person throughout), the additional value shall be calculated as if insubsection (7) below—

(a) the amount referred to in paragraph (a) were the market value of thatproperty as at that date, and

(b) the amount referred to in paragraph (b) did not include expenditure onimprovements made before that date.

(7) For the purposes of this section, the cost of providing any livingaccommodation shall be taken to be the aggregate of—

(a) the amount of any expenditure incurred in acquiring the estate or interestin the property held by a relevant person, and

(b) the amount of any expenditure incurred by a relevant person before theyear of assessment in question on improvements to the property.

(8) The aggregate amount mentioned in subsection (7) above shall be reducedby the amount of any payment made by the recipient to a relevant person, sofar as that amount represents a reimbursement of any such expenditure as ismentioned in paragraph (a) or (b) of that subsection or representsconsideration for the grant to the recipient of a tenancy of the property.

(9) For the purposes of this section, any of the following persons is arelevant person—

(a) the person providing the accommodation;

(b) any person, other than the recipient, who is connected with a personfalling within paragraph (a) above.

(10) In this section—

• “the appropriate percentage” means the rate applicable forthe purposes of section 160 as at the beginning of the year of assessment inquestion;

• “market value”, in relation to any property, means the pricewhich that property might reasonably be expected to fetch on a sale in theopen market with vacant possession, no reduction being made, in estimating themarket value, on account of any option in respect of the property held by therecipient, or a person connected with him, or by any of the persons mentionedin subsection (9) above;

• “property”, in relation to any living accommodation, meansthe property consisting of that living accommodation;

• “tenancy” includes a sub-tenancy;

and section 839 shall apply for the purposes of this section.”

10 U.K. In section 598(1)(b) (charge to tax: repayment of employee’scontributions) the word “relevant” shall be inserted before the words “statutoryscheme”.

11 (1) Section 599 (charge to tax: commutation of entire pension in specialcircumstances) shall be amended as follows. U.K.

(2) In subsection (2)(b) the word “relevant” shall be inserted before thewords “statutory scheme”.

(3) After subsection (9) there shall be inserted—

“(10) In subsection (1)(a) above “the permitted maximum” means, as regards a charge to taxarising under this section in a particular year of assessment, the figurefound for that year by virtue of subsections (11) and (12) below.

(11) For the years 1988-89 and l989-90 the figure is £60,000.

(12) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).”

12 (1) The following section shall be inserted after section 599— U.K.

“599A Charge to tax: payments out of surplus funds.

(1) This subsection applies to any payment which is made to or for the benefitof an employee or to his personal representatives out of funds which are orhave been held for the purposes of—

(a) a scheme which is or has at any time been an exempt approved scheme, or

(b) a relevant statutory scheme established under a public general Act,

and which is made in pursuance of a duty to return surplus funds.

(2) On the making of a payment to which subsection (1) above applies, theadministrator of the scheme shall be charged to income tax under Case VI ofSchedule D at the relevant rate on such amount as, after deduction of tax atthat rate, would equal the amount of the payment.

(3) Subject to subsection (4) below, the relevant rate shall be 35 per cent.

(4) The Treasury may by order from time to time increase or decrease therelevant rate.

(5) Where a payment made to or for the benefit of an employee is one to whichsubsection (1) above applies, it shall be treated in computing the totalincome of the employee for the year in which it is made as income for thatyear which is—

(a) received by him after deduction of income tax at the basic rate from acorresponding gross amount, and

(b) chargeable to income tax under Case VI of Schedule D.

(6) But, subject to subsection (7) below, no assessment to income tax shallbe made on, and no repayment of income tax shall be made to, the employee.

(7) Subsection (6) above shall not prevent an assessment in respect of incometax at a rate other than the basic rate.

(8) Subsection (5) above applies whether or not the employee is the recipientof the payment.

(9) Any payment chargeable to tax under this section shall not be chargeableto tax under section 598, 599 or 600 or under the Regulations mentioned inparagraph 8 of Schedule 3 to the Finance Act 1971.

(10) In this section—

• “employee”, in relation to a relevant statutory scheme,includes any officer;

• references to any payment include references to any transfer of assets orother transfer of money’s worth.”

13 (1) Section 600 (charge to tax: unauthorised payments to or for employees)shall be amended as follows. U.K.

(2) In subsection (1) the words “or have been” and “or has at any time been” shall be omitted.

(3) In subsection (2) for paragraphs (a) and (b) there shall be substitutedthe words “is not expressly authorised by the rules of the scheme or byvirtue of paragraph 33 of Schedule 6 to the Finance Act 1989.”

14 U.K. In section 605 (information) the word “relevant” shall be inserted before the words “statutory scheme” in subsections (2), (3)(a) and (b)(i) and(4).

15 U.K. The following section shall be inserted after section 611—

“611A Definition of relevant statutory scheme.

(1) In this Chapter any reference to a relevant statutory scheme is areference to a statutory scheme—

(a) established before 14th March 1989, or

(b) established on or after that date and entered in the register maintainedby the Board for the purposes of this section.

(2) The Board shall maintain a register for the purposes of this section andshall enter in it the relevant particulars of any statutory scheme establishedon or after 14th March 1989 which is reported to the Board by the authorityresponsible for establishing it as a scheme the provisions of which correspondwith those of an approved scheme.

(3) The reference in subsection (2) above to the relevant particulars, inrelation to a scheme, is a reference to—

(a) the identity of the scheme,

(b) the date on which it was established,

(c) the authority responsible for establishing it, and

(d) the date on which that authority reported the scheme to the Board.

(4) Where the Board enter the relevant particulars of a scheme in the registermaintained by them for the purposes of this section, they shall inform theauthority responsible for establishing the scheme of the date of the entry.”

16 U.K. In section 828(4) (orders) after “377(8)” there shall be inserted “590C(6)”.

17 U.K. Paragraph 8 of Schedule 23 (benefits under scheme for additional voluntarycontributions causing benefits under main scheme to abate if aggregatebenefits exceed limits) shall be omitted.

Effect of amendments U.K.

18 (1) Paragraphs 2, 6(2), 8(2)(b), 10, 11(2), 14 and 15 above shall be deemedto have come into force on 14th March 1989. U.K.

(2) Paragraphs 3(2) and (3) and 4 above shall have effect in relation to ascheme not approved by the Board before the day on which this Act is passed;but if the scheme came into existence before 14th March 1989 those provisionsshall not have effect as regards an employee who became a member of the schemebefore 1st June 1989.

(3) Paragraph 3(4) above shall have effect where a determination is made onor after the day on which this Act is passed.

(4) Paragraphs 5 and 6(3), (4) and (5) above shall have effect for the year1989-90 and subsequent years of assessment, but paragraphs 5(4) and 6(5) aboveshall not have effect as regards a person’s remuneration in respect of anoffice or employment in such circumstances as the Board may by regulationsprescribe for the purposes of this sub-paragraph.

(5) Paragraphs 7 and 8(2)(a) and (3) above shall have effect for the year1988-89 and subsequent years of assessment.

(6) Paragraph 8(4) above shall not have effect where a sum has been deemed tobe income of a person by virtue of section 595(2) before 6th April 1988.

(7) Paragraph 9 above shall have effect in relation to payments made andbenefits provided on or after the day on which this Act is passed.

(8) Paragraph 11(3) above shall have effect where the charge to tax undersection 599 arises on or after 14th March 1989, but not where the scheme cameinto existence before that date and the employee became a member of it before1st June 1989.

(9) Paragraphs 12 and 13 above shall have effect in relation to payments madeon or after the day on which this Act is passed.

(10) Paragraph 17 above shall have effect in relation to benefits provided onor after the day on which this Act is passed.

Modifications etc. (not altering text)

C19 For regulations see Part III Vol. 5 (under “Retirement benefit schemes: tax relief on contributions”)

Part II U.K. Approved Schemes: General

Preliminary U.K.

19 (1) This Part of this Schedule shall be deemed to have come into force on 14thMarch 1989 and, subject to sub-paragraphs (2) to (4) below, applies inrelation to any retirement benefits scheme (within the meaning of Chapter Iof Part XIV of the Taxes Act 1988) approved by the Board before the day onwhich this Act is passed. U.K.

(2) The Board may by regulations provide that, in circumstances prescribed inthe regulations, this Part of this Schedule or any provision of it shall notapply or shall apply with such modifications as may be so prescribed.

(3) Regulations under sub-paragraph (2) above—

(a) may include provision authorising the Board to direct that this Part ofthis Schedule or any provision of it shall not apply in any particular casewhere in the opinion of the Board the facts are such that its applicationwould not be appropriate;

(b) may take effect (and may authorise any direction given under them to takeeffect) as from 14th March 1989 or any later date;

(c) may make such supplementary provision as appears to the Board to benecessary or expedient.

(4) This Part of this Schedule shall not apply to a scheme if, before the endof 1989, the administrator of the scheme gives written notice to the Boardthat it is not to apply.

(5) Where a notice is given to the Board under sub-paragraph (4) above, thescheme shall cease to be approved—

(a) if it came into existence before 14th March 1989, with effect from 1stJune 1989 or (if later) the date with effect from which it was approved;

(b) if it came into existence on or after 14th March 1989, with effect fromthe date with effect from which it was approved.

Modifications etc. (not altering text)

C20 For regulations see Part III Vol. 5 (under “Retirement benefit schemes: tax relief on contributions”)

Remuneration U.K.

20 (1) This paragraph applies— U.K.

(a) where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2) The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary and notwithstanding the effect of anything in Schedule23 to the Taxes Act 1988) as if, in arriving at the employee’s relevant annualremuneration for the purposes of calculating benefits, any excess of whatwould be his relevant annual remuneration (apart from this paragraph) over thepermitted maximum for the year of assessment in which his participation in thescheme ceases shall be disregarded.

(3) The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if, in arriving at the employee’s remuneration forthe year 1988-89 or any subsequent year of assessment for the purposes of anyrestriction on the aggregate amount of contributions payable under the schemeby the employee and the employer, there were disregarded any excess of whatwould be his remuneration for the year (apart from this paragraph) over thepermitted maximum for the year.

(4) In this paragraph “the permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of sub-paragraphs (5) and (6)below.

(5) For the years 1988-89 and 1989-90 the figure is £60,000.

(6) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C of the Taxes Act 1988, by virtueof section 590C(4) and (5).

Modifications etc. (not altering text)

C21 See The Retirement Benefits Schemes (Continuationof Rights of Members of Approved Schemes) Regs. 1990 (S.I.1990/2101–in Part III Vol. 5)for circumstanceswhen para. 20disapplied or modified; when para. 21modified; or when para. 22disapplied

21 (1) The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if the amount of contributions payable under thescheme by an employee in the year 1989-90 or any subsequent year of assessmentwere limited to 15 per cent. of his remuneration for the year in respect ofthe employment. U.K.

(2) Where in relation to any year of assessment a percentage higher than 15per cent. applies for the purposes of section 592(8) or (8A) of the Taxes Act1988 (relief in respect of contributions) as regards any employee,sub-paragraph (1) above, as regards him, shall have effect in relation to thatyear with the substitution for 15 per cent. of that higher percentage.

Modifications etc. (not altering text)

C22 See The Retirement Benefits Schemes (Continuationof Rights of Members of Approved Schemes) Regs. 1990 (S.I.1990/2101–in Part III Vol. 5)for circumstanceswhen para. 20disapplied or modified; when para. 21modified; or when para. 22disapplied

22 (1) This paragraph applies— U.K.

(a) where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2) For the purposes of paragraph 21(1) above, in arriving at the employee’sremuneration for the year any excess of what would be his remuneration for theyear (apart from this sub-paragraph) over the permitted maximum for the yearshall be disregarded.

(3) In sub-paragraph (2) above “the permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of sub-paragraphs (4) and (5)below.

(4) For the year 1989-90 the figure is £60,000.

(5) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C of the Taxes Act 1988, by virtueof section 590C(4) and (5).

Modifications etc. (not altering text)

C23 See The Retirement Benefits Schemes (Continuationof Rights of Members of Approved Schemes) Regs. 1990 (S.I.1990/2101–in Part III Vol. 5)for circumstanceswhen para. 20disapplied or modified; when para. 21modified; or when para. 22disapplied

Accelerated accrual U.K.

23 (1) This paragraph applies where the scheme allows a member to commute hispension or part of it for a lump sum or sums and— U.K.

(a) where the scheme came into existence before 14th March 1989, applies asregards an employee who became a member of the scheme on or after 1st June1989, and

(b) where the scheme came into existence on or after 14th March 1989, appliesas regards any employee who is a member of the scheme (whenever he became amember).

(2) The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary and notwithstanding the effect of paragraph 3 of Schedule23 to the Taxes Act 1988) as if they did not allow the employee to obtain byway of commutation a lump sum or sums exceeding in all the greater of thefollowing sums—

(a) a sum of three-eightieths of his relevant annual remuneration for eachyear of service up to a maximum of 40;

(b) a sum of the pension payable under the scheme to the employee for thefirst year in which it is payable multiplied by 2.25.

(3) The following rules shall apply in calculating, for the purposes ofsub-paragraph (2) above, the pension payable under the scheme to the employeefor the first year in which it is payable—

(a) if the pension payable for the year changes, the initial pension payableshall be taken;

(b) it shall be assumed that the employee will survive for the year;

(c) the effect of commutation, and of any allocation of pension to providebenefits for survivors, shall be ignored.

Modifications etc. (not altering text)

C24 See The Retirement Benefits Schemes (Contiuationof Rights of Members of Approved Schemes) Regs. 1990 (S.I.1990/2101–in Part III Vol. 5)for circumstanceswhen para. 23disapplied or modified

24 (1) This paragraph applies where the scheme provides a lump sum or sums fora member otherwise than by commutation of his pension or part of itand— U.K.

(a) where the scheme came into existence before 14th March 1989, applies asregards an employee who became a member of the scheme on or after 1st June1989, and

(b) where the scheme came into existence on or after 14th March 1989, appliesas regards any employee who is a member of the scheme (whenever he became amember).

(2) The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary and notwithstanding the effect of paragraph 4 of Schedule23 to the Taxes Act 1988) as if they did not allow the payment to theemployee, otherwise than by way of commutation, of a lump sum or sumsexceeding in all the greater of the following sums—

(a) a sum of three-eightieths of his relevant annual remuneration for eachyear of service up to a maximum of 40;

(b) a sum of the relevant number of eightieths of his relevant annualremuneration.

(3) For the purposes of sub-paragraph (2) above the relevant number shall befound by taking the number of eightieths (of relevant annual remuneration) byreference to which the pension payable under the scheme to the employee iscalculated, multiplying that number by three, and treating the resultingnumber as 120 if it would otherwise exceed 120.

Modifications etc. (not altering text)

C25 See The Retirement Benefits Schemes (Continuationof Rights of Members of Approved Schemes) Regs. 1990 (S.I.1990/2101–in Part III Vol. 5)for circumstanceswhen para. 24disapplied

Associated employments U.K.

25 (1) This paragraph applies— U.K.

(a) where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2) Where the employee is a member of the scheme by virtue of two or morerelevant associated employments, the rules of the scheme shall have effect asmentioned in sub-paragraph (3) below.

(3) The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if they prohibited the amount payable by way ofpension in respect of service in any of the relevant associated employments,when aggregated with any amount payable by way of pension in respect ofservice in the other such employment or employments, from exceeding therelevant amount.

(4) For the purposes of sub-paragraph (3) above the relevant amount, inrelation to the employee, shall be found by applying the followingformula—

(5) For the purposes of this paragraph—

(a) section 590B(5) and (6) of the Taxes Act 1988 shall apply for the purposeof defining A, and

(b) section 590B(9) to (11) of that Act shall apply for the purpose ofdefining C,

as they apply for the purposes of section 590B of that Act, except thatfor the purposes of this paragraph A shall not exceed 20.

(6) The reference to two or more relevant associated employments shall beconstrued in accordance with section 590A of the Taxes Act 1988.

Modifications etc. (not altering text)

C26 See The Retirement Benefits Schemes (Continuationof Rights of Members of Approved Schemes) Regs. 1990 (S.I.1990/2101–in Part III Vol. 5)for circumstanceswhen paras. 25or 26disapplied

Connected schemes U.K.

26 (1) This paragraph applies— U.K.

(a) where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2) Where in relation to the employee the scheme is connected with anotherscheme which is (or other schemes each of which is) an approved scheme, therules of the scheme shall have effect as mentioned in sub-paragraph (3) below.

(3) The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if they prohibited the amount payable by way ofpension under the scheme, when aggregated with any amount payable by way ofpension under the other scheme or schemes, from exceeding the relevant amount.

(4) For the purposes of sub-paragraph (3) above the relevant amount, inrelation to the employee, shall be found by applying the followingformula—

(5) For the purposes of this paragraph—

(a) section 590B(7) and (8) of the Taxes Act 1988 shall apply for the purposeof defining B, and

(b) section 590B(9) to (11) of that Act shall apply for the purpose ofdefining C,

as they apply for the purposes of section 590B of that Act, except thatfor the purposes of this paragraph B shall not exceed 20.

(6) References in this paragraph to the scheme being connected with anotherscheme in relation to the employee shall be construed in accordance withsection 590A of the Taxes Act 1988.

Modifications etc. (not altering text)

C27 See The Retirement Benefits Schemes (Continuationof Rights of Members of Approved Schemes) Regs. 1990 (S.I.1990/2101–in Part III Vol. 5)for circumstanceswhen paras. 25or 26disapplied

Augmentation U.K.

27 (1) This paragraph applies— U.K.

(a) where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2) Where in addition to being a member of the scheme (the main scheme) theemployee is also a member of an approved scheme (the voluntary scheme) whichprovides additional benefits to supplement those provided by the main schemeand to which no contributions are made by any employer of his, sub-paragraph(3) below shall apply in relation to any augmentation of the benefits providedfor him by the main scheme after he has ceased to participate in it.

(3) Any rules of the main scheme imposing a limit on the amount of a benefitprovided for the employee shall have effect (notwithstanding anything in themto the contrary) as if they provided for the limit to be reduced by the amountof any like benefit provided for the employee by the voluntary scheme.

Centralised schemes U.K.

28 (1) Where the scheme is a centralised scheme, sub-paragraph (1)(a) and (b) ofeach of paragraphs 20 and 22 to 27 above shall have effect with thesubstitution for the reference to the coming into existence of the scheme ofa reference to the commencement of the employer’s participation in the scheme. U.K.

(2) For the purposes of this paragraph a centralised scheme is a retirementbenefits scheme (within the meaning of Chapter I of Part XIV of the Taxes Act1988) established for the purpose of enabling any employer, other than anemployer associated with the person by whom the scheme is established, toparticipate in it as regards his employees.

(3) For the purposes of sub-paragraph (2) above one person is associated withanother if (directly or indirectly) one is controlled by the other or if bothare controlled by a third person.

(4) In sub-paragraph (3) above the reference to control, in relation to a bodycorporate, shall be construed—

(a) where the body corporate is a close company, in accordance with section416 of the Taxes Act 1988, and

(b) where it is not, in accordance with section 840 of that Act.

Election U.K.

29 (1) In a case where— U.K.

(a) an employee became a member of the scheme on or after 17th March 1987 andbefore 1st June 1989, and

(b) he gives written notice to the administrator of the scheme that this Partof this Schedule is to apply in his case,

he shall be deemed for the purposes of this Part of this Schedule to havebecome a member of the scheme on 1st June 1989.

(2) A notice under this paragraph shall be given in such form as the Board mayprescribe.

Supplementary U.K.

30 U.K. In this Part of this Schedule “relevant annual remuneration” means final remuneration or,if the scheme provides for benefits to be calculated by reference to someother annual remuneration, that other annual remuneration.

Part III U.K. Approved Schemes: Additional Voluntary Contributions

Preliminary U.K.

31 (1) Subject to sub-paragraphs (2) to (4) below, this Part of this Scheduleapplies in relation to any retirement benefits scheme which was approved bythe Board before the day on which this Act is passed and which makes provisionfor the payment by an employee of voluntary contributions. U.K.

(2) Paragraph 32 below only applies where—

(a) the provision for the payment of voluntary contributions is freestanding,and

(b) the scheme is not one to which contributions are made by any employer ofthe employee.

(3) The Board may by regulations provide that, in circumstances prescribed inthe regulations, this Part of this Schedule or any provision of it shall notapply or shall apply with such modifications as may be so prescribed.

(4) Regulations under sub-paragraph (3) above—

(a) may include provision authorising the Board to direct that this Part ofthis Schedule or any provision of it shall not apply in any particular casewhere in the opinion of the Board the facts are such that its applicationwould not be appropriate;

(b) may make such supplementary provision as appears to the Board to benecessary or expedient.

Abatement of benefits U.K.

32 (1) The scheme shall have effect (notwithstanding anything in it to thecontrary) as if its rules included a rule imposing, in the case of eachbenefit provided for the employee, such a limit on the amount of the benefitas is mentioned in sub-paragraph (2) below. U.K.

(2) The limit referred to above is a limit of such an amount as is foundby—

(a) taking the amount of the limit imposed by the main scheme on the provisionof any like benefit for the employee by that scheme, and

(b) subtracting from that amount an amount equal to the relevant amount.

(3) For the purposes of sub-paragraph (2) above the relevant amount is—

(a) where the employee is not a member of any other relevant scheme, theamount of any like benefit provided for the employee by the main scheme, and

(b) where the employee is a member of another relevant scheme or schemes, anamount equal to the aggregate of the amount mentioned in paragraph (a) aboveand the amount of any like benefit provided for the employee by the otherrelevant scheme or schemes.

(4) In sub-paragraph (3) above, references to the employee being a member ofanother relevant scheme are references to his being a member of any approvedscheme, other than the scheme, which provides additional benefits for him tosupplement those provided by the main scheme.

(5) This paragraph shall have effect in relation to benefits provided on orafter the day on which this Act is passed.

Return of surplus funds U.K.

33 (1) The scheme shall have effect (notwithstanding anything in it to thecontrary) as if its rules included a rule requiring the administrator, in thecircumstances mentioned in sub-paragraph (2) or (3) below, as the case may be,to make to the employee or his personal representatives a payment of an amountequal to the prescribed amount out of funds which are or have been held forthe purposes of the scheme. U.K.

(2) Where the provision for the payment of voluntary contributions isfreestanding, the circumstances referred to above are that the amount of anybenefit provided for the employee by the scheme would have been greater hadthe amount of any like benefit provided for him by the main scheme, or anyother relevant scheme of which he is a member, been less.

(3) Where the provision for the payment of voluntary contributions is notfreestanding, the circumstances referred to above are that the amount of anybenefit provided for the employee by virtue of the voluntary contributionswould have been greater had the amount of any like benefit provided for himby the principal provisions of the scheme, or any other relevant scheme ofwhich he is a member, been less.

(4) In sub-paragraph (1) above, the reference to the prescribed amount is toan amount calculated in accordance with the method for the time beingspecified in regulations made for the purposes of section 591 of the Taxes Act1988 as the method to be used for calculating the amount of any surplus funds.

(5) In sub-paragraph (2) above, the reference to the employee being a memberof another relevant scheme is a reference to his being a member of anyapproved scheme, other than the scheme, which provides additional benefits forhim to supplement those provided by the main scheme.

(6) In sub-paragraph (3) above, the reference to the employee being a memberof another relevant scheme is a reference to his being a member of anyapproved scheme, other than the scheme, which provides additional benefits forhim to supplement those provided by the principal provisions of the scheme.

34 U.K. The scheme shall have effect (notwithstanding anything in it to thecontrary) as if its rules included a rule enabling the administrator, beforemaking any payment by virtue of paragraph 33 above, to deduct the amount ofany tax to which he is charged by section 599A of the Taxes Act 1988 by virtueof making the payment.

Supplementary U.K.

35 U.K. In this Part of this Schedule—

(a) “administrator”, “approved scheme”, “employee” and “retirement benefits scheme”have the same meanings as in Chapter I of Part XIV of the Taxes Act 1988,

(b) “freestanding”, in relation to provision for the payment ofvoluntary contributions, means provision which is contained in a retirementbenefits scheme other than the one which provides the benefits which thevoluntary contributions are intended to supplement,

(c) “the main scheme”, in relation to provision for the paymentof voluntary contributions which is freestanding, means the retirementbenefits scheme which provides the benefits which the voluntary contributionsare intended to supplement,

(d) “principal provisions”, in relation to a retirement benefitsscheme which makes provision for the payment of voluntary contributions whichis not freestanding, means the provisions of the scheme concerning theprovision of the benefits which the voluntary contributions are intended tosupplement,

(e) references to the provision of a benefit for an employee shall, inrelation to a deceased employee, be construed as references to the provisionof a benefit in respect of him, and

(f) references to an employee being (or not being) a member of a scheme shall,in relation to a deceased employee, be construed as references to his havingbeen (or not having been) a member of a scheme immediately before the time ofhis death.

Section 77.

SCHEDULE 7 U.K. Personal Pension Schemes

Part I U.K. Amendments of Taxes Act

1 U.K. Chapter IV of Part XIV of the Taxes Act 1988 (personal pension schemes)shall be amended as mentioned in the following provisions of this Part of thisSchedule.

2 (1) Section 635 (lump sum to member) shall be amended as follows. U.K.

(2) The following subsection shall be substituted for subsection (3) (lump sumnot to exceed one quarter of value of benefits for member)—

“(3) The lump sum must not exceed one quarter of the difference between—

(a) the total value, at the time when the lump sum is paid, of the benefitsprovided for by the arrangements made by the member in accordance with thescheme, and

(b) the value, at that time, of such of the member’s rights under the schemeas are protected rights for the purposes of the SocialSecurity Act 1986 or the Social Security(Northern Ireland) Order 1986.”

(3) Subsection (4) (lump sum not to exceed £150,000 or sum specified byTreasury by order) shall cease to have effect.

(4) This paragraph shall have effect in relation to the approval of a schemeon or after the day on which this Act is passed; but if the scheme came intoexistence before that day sub-paragraph (2) above shall not have effect asregards arrangements made by a member in accordance with the scheme beforethat day.

3 (1) In section 640 (maximum amount of deductions) the following table shallbe substituted for the table in subsection (2) (maximum amount by referenceto age)— U.K.

36 to 45	20 per cent.
46 to 50	25 per cent.
51 to 55	30 per cent.
56 to 60	35 per cent.
61 or more	40 per cent.

(2) This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

4 (1) The following section shall be inserted after section 640— U.K.

“640A Earnings cap.

(1) In arriving at an individual’s net relevant earnings for a year ofassessment for the purposes of section 640 above, any excess of what would behis net relevant earnings for the year (apart from this subsection) over theallowable maximum for the year shall be disregarded.

(2) In subsection (1) above “the allowable maximum” means, as regards a particular yearof assessment, the figure found for that year by virtue of subsections (3) and(4) below.

(3) For the year of assessment 1989-90 the figure is £60,000.

(4) For the year of assessment 1990-91 and any subsequent year of assessmentthe figure is the figure found for that year, for the purposes of section590C, by virtue of section 590C(4) and (5).”

(2) This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

5 (1) Section 644 (meaning of relevant earnings) shall be amended as follows. U.K.

(2) In subsection (2) for “(5)” there shall be substituted “(6F)”.

(3) The following subsections shall be inserted after subsection (6)—

“(6A) Emoluments of an individual as an employee of a company are not incomewithin subsection (2) above if—

(a) he is a controlling director of the company at any time in the year ofassessment in question or has been a controlling director of the company atany time in the ten years immediately preceding that year of assessment, and

(b) any of subsections (6B) to (6E) below applies in his case.

(6B) This subsection applies in the case of the individual if—

(a) at any time in the year of assessment in question he is in receipt ofbenefits under a relevant superannuation scheme, and

(b) the benefits are payable in respect of past service with the company.

(6C) This subsection applies in the case of the individual if—

(a) at any time in the year of assessment in question he is in receipt ofbenefits under a personal pension scheme,

(b) the scheme has received a transfer payment relating to him from a relevantsuperannuation scheme, and

(c) the transfer payment is in respect of past service with the company.

(6D) This subsection applies in the case of the individual if—

(a) at any time in the year of assessment in question he is in receipt ofbenefits under a relevant superannuation scheme,

(b) the benefits are payable in respect of past service with another company,

(c) the emoluments are for a period during which the company mentioned insubsection (6A) above has carried on a trade or business previously carriedon by the other company, and

(d) the other company carried on the trade or business at any time during theperiod of service in respect of which the benefits are payable.

(6E) This subsection applies in the case of the individual if—

(a) at any time in the year of assessment in question he is in receipt ofbenefits under a personal pension scheme,

(b) the scheme has received a transfer payment relating to him from a relevantsuperannuation scheme,

(c) the transfer payment is in respect of past service with another company,

(d) the emoluments are for a period during which the company mentioned insubsection (6A) above has carried on a trade or business previously carriedon by the other company, and

(e) the other company carried on the trade or business at any time during theperiod of service in respect of which the transfer payment was made.

(6F) For the purposes of subsections (6A) to (6E) above—

(a) a person is a controlling director of a company if he is a director (asdefined by section 612(1)), and he is within paragraph (b) of section 417(5),in relation to the company;

(b) “relevant superannuation scheme” has the same meaning as insection 645(1);

(c) references to benefits payable in respect of past service with a companyinclude references to benefits payable partly in respect of past service withthe company; and

(d) references to a transfer payment in respect of past service with a companyinclude references to a transfer payment partly in respect of past servicewith the company.”

(4) This paragraph shall be deemed to have come into force on 6th April 1989.

6 (1) Section 645 (earnings from pensionable employment) shall be amended asfollows. U.K.

(2) In subsection (1)(c) for the words “neither subsection (4) norsubsection (5) below applies” there shall be substituted the words “subsection (4) below does not apply”.

(3) In subsection (3) the word “and” following paragraph (a) shall beomitted and after paragraph (b) there shall be inserted “and

(c) which is of a description mentioned in section 596(1)(a), (b) or (c).”

(4) After subsection (4) there shall be inserted—

“(4A) Where the emoluments from an office or employment held by an individualare foreign emoluments within the meaning of section 192, this section shallhave effect with the substitution of the following for paragraph (c) ofsubsection (3) above—”

(c) which corresponds to a scheme of a description mentioned in section596(1)(a), (b) or (c).””

(5) Subsection (5) shall cease to have effect.

(6) This paragraph shall be deemed to have come into force on 6th April 1989.

7 (1) In section 646 (“net relevant earnings”) in subsection (1) after thewords “(7) below” there shall be inserted the words “and section646A”. U.K.

(2) This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

8 (1) The following section shall be inserted after section 646— U.K.

“646A Earnings from associated employments.

(1) This section applies where in the year of assessment in question—

(a) an individual holds two or more offices or employments which areassociated in that year,

(b) one or more of them is an office or employment to which section 645applies (“pensionable job”), and

(c) one or more of them is an office or employment to which that section doesnot apply (“non-pensionable job”).

(2) Where the emoluments for that year from the pensionable job (or jobs) areequal to or exceed the allowable maximum for that year, section 646(1) shallhave effect in the case of the individual as if the references to relevantearnings were references to relevant earnings not attributable to thenon-pensionable job (or jobs).

(3) Where the allowable maximum for that year exceeds the emoluments for thatyear from the pensionable job (or jobs), the individual’s net relevantearnings, so far as attributable to the non-pensionable job (or jobs), shallnot be greater than the amount of the excess.

(4) For the purposes of this section two or more offices or employments heldby an individual in a year of assessment are associated in that year if theemployers in question are associated at any time during it.

(5) For the purposes of subsection (4) above, employers are associated if(directly or indirectly) one is controlled by the other or if both arecontrolled by a third person.

(6) In subsection (5) above the reference to control, in relation to a bodycorporate, shall be construed—

(a) where the body corporate is a close company, in accordance with section416, and

(b) where it is not, in accordance with section 840.

(7) In this section “the allowable maximum” has the same meaning as in section640A(1).”

(2) This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

9 U.K. In section 655(5) (provisional approval in the case of applications madebefore 1st February 1990) the words “in cases where the applications aremade before 1st February 1990” shall be omitted.

Part II U.K. Schemes Approved Before Passing of This Act

Interpretation U.K.

10 U.K. In this Part of this Schedule—

(a) “personal pension scheme” has the same meaning as in ChapterIV of Part XIV of the Taxes Act 1988, and

(b) references to approval of such a scheme do not include references toprovisional approval under regulations made under section 655(5) of that Act.

Lump sum to member U.K.

11 (1) This paragraph applies as regards arrangements made by a member of apersonal pension scheme approved by the Board before the day on which this Actis passed, if the arrangements are made by the member in accordance with thescheme on or after that day. U.K.

(2) The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if any limitation imposed on the maximum amountpayable to the member by way of lump sum, and imposed by reference to afraction of the total value of the benefits for him provided for by thearrangements, were imposed by reference to the same fraction of the differencebetween—

(a) the total value, at the time when the lump sum is paid, of the benefitsprovided for by the arrangements, and

(b) the value, at that time, of such of his rights under the scheme as areprotected rights for the purposes of the [F21 Pension Schemes Act 1993] or the [F22 Pension Schemes (Northern Ireland) Act 1993].

Textual Amendments

F21 Words in Sch. 7 para. 11(2)(b) substituted (7.2.1994) by 1993 c. 48, s. 190, Sch. 8 para.22 (with ss. 6(8), 164); S.I. 1994/86, art. 2

F22 Words in Sch. 7 para. 11(2)(b) substituted (7.2.1994) by 1993 c. 49, s. 184, Sch. 7 para.24; S.R. 1994/17, art. 2

12 (1) This paragraph applies where on or after the day on which this Act ispassed a lump sum becomes payable under a personal pension scheme approved bythe Board before that day. U.K.

(2) The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if any limitation imposed on the maximum amountpayable to a member by way of lump sum, and imposed by reference to a figure,did not apply.

(3) The reference in sub-paragraph (2) above to a limitation imposed on themaximum amount payable to a member by way of lump sum does not include areference to a limitation imposed on the maximum amount so payable out of atransfer payment.

Section 84.

SCHEDULE 8 U.K. Amendments of Chapter I of Part XII of Taxes Act 1988 (InsuranceCompanies)

1 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F23

Textual Amendments

F23 Sch. 8 paras. 1, 3(3), 7 repealed by Finance Act 1990 (c.29), s. 132, Sch. 19 Pt. IV, Notes 6, 14

2 U.K. Section 433 (profits reserved for policy holders or annuitants) shallcease to have effect.

3 (1) In section 434 (franked investment income etc.), for subsection (3) thereshall be substituted the following subsections— U.K.

“(3) Subject to sections 437 and 438, the policy holders’ fraction of thefranked investment income from investments held in connection with a company’slife assurance business shall not be used under Chapter V of Part VI to frankdistributions made by the company and, accordingly, for the purposes of thatChapter (other than the application of franked investment income under section241), in relation to any unrelieved income of a company falling withinsubsection (1) above, the surplus of franked investment income for anyaccounting period means the aggregate of—

(a) the policy holders’ fraction of that franked investment income; and

(b) the amount determined under section 241(3) on the basis that the referencetherein to franked investment income is a reference only to the shareholders’fraction of that income.

(3A) The policy holders’ fraction of the franked investment income frominvestments held in connection with a company’s life assurance business shallbe left out of account in determining, under subsection (7) of section 13, thefranked investment income forming part of the company’s profits for thepurposes of that section.”

(2) Subsections (4) and (5) of that section shall be omitted.

(3)

F24 (4) In subsection (7) of that section for “(4)” there shall besubstituted “(3)” and after the words “against which” there shallbe inserted “disregarding relief under section 242”.

Textual Amendments

F24 Sch. 8 paras. 1, 3(3), 7 repealed by Finance Act 1990 (c.29), s. 132, Sch. 19 Pt. IV, Notes 6, 14

F25 4 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F25 Sch. 8 para. 4 repealed (1.5.1995 with effect in accordance with Sch. 8 para. 57 of the amending Act) by 1995 c. 4, s. 162, Sch. 29 Pt. VIII(5), note

5 U.K. Section 435 (taxation of gains reserved for policy holders and annuitants)shall cease to have effect.

6 U.K. In section 436 (annuity and pension business: separate charge on profits)in subsection (3)(a) for the words “section 433” there shall besubstituted “sections 82 and 83 of the Finance Act 1989”.

7 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F26

Textual Amendments

F26 Sch. 8 paras. 1, 3(3), 7 repealed by Finance Act 1990 (c.29), s. 132, Sch. 19 Pt. IV, Notes 6, 14

Section 89A.]

[F27 SCHEDULE 8A U.K. Modification of sections 83 and 89 in relation to overseas life insurance companies

Textual Amendments

F27 Sch. 8A inserted (27.7.1993) by 1993 c. 34, s. 101(2), Sch.10

[F28 1 (1) In their application to an overseas life insurance company sections 83 and 83A of this Act shall have effect with the modifications specified in paragraphs 1A to 1C below.

(2) In those paragraphs—

(a) any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act; and

(b) any expression to which a meaning is given by section 11A of that Act has that meaning.]

Textual Amendments

F28 Sch. 8A paras. 1, 1A-1C substituted for para. 1 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 49(2) (with Sch. 8 paras. 55(2), 57(1))

F29 1A (1) The reference in section 83(2)(a) to investment income shall be construed as a reference to such of the income concerned as is attributable to the branch or agency in the United Kingdom through which the company carries on life assurance business.

(2) The reference to assets in section 83(2)(b) (as it applies apart from subsection (3) of that section) shall be construed as a reference to such of the assets concerned—

(a) as are—

(i) section 11(2)(b) assets;

(ii) section 11(2)(c) assets; or

(iii) assets which by virtue of section 11B of the Taxes Act 1988 are attributed to the branch or agency; or

(b) as are assets—

(i) (in a case where section 11C of that Act (other than subsection (9)) applies) of the relevant fund, or

(ii) (in a case where that section including that subsection applies) of the relevant funds,

other than assets which fall within paragraph (a) above.

(3) In determining for the purposes of section 83(2) (as it applies apart from subsection (3) of that section) whether there has been any increase or reduction in the value (whether realised or not) of assets—

(a) no regard shall be had to any period of time during which an asset held by the company does not fall within paragraph (a) or (b) of sub-paragraph (2) above; and

(b) in the case of an asset which falls within paragraph (b) of that sub-paragraph, only the specified portion of any increase or reduction in the value of the asset shall be taken into account.

For the purposes of paragraph (b) above the specified portion of any increase or reduction in the value of an asset is found by applying to that increase or reduction the same fraction as would, by virtue of section 11C of the Taxes Act 1988, be applied to any relevant gain accruing to the company on the disposal of the asset.

(4) For the reference in section 83(3) to any amount being transferred into the company’s long term business fund from other assets of the company, or otherwise added to that fund, there shall be substituted a reference to assets becoming assets of the long term business fund used or held for the purposes of the company’s United Kingdom branch or agency, having immediately previously been held by the company otherwise than as assets of that fund or used or held otherwise than for those purposes.

The amount of the increase in value under section 83(2)(b), as it applies in relation to such a transfer, shall be taken to be an amount equal to the value of the assets transferred.

Textual Amendments

F29 Sch. 8A paras. 1, 1A-1C substituted for para. 1 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 49(2) (with Sch. 8 paras. 55(2), 57(1))

F30 1B The references in section 83A to the company’s long term business shall be construed as references to the whole of that business or to the whole of that business other than business in respect of which preparation of a revenue account for the purposes of the Insurance Companies Act 1982 is not required.

Textual Amendments

F30 Sch. 8A paras. 1, 1A-1C substituted for para. 1 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 49(2) (with Sch. 8 paras. 55(2), 57(1))

F31 1C (1) Where for a period of account any investment income referred to in section 83(2)(a) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it arises in the period.

(2) Where for a period of account any increase in value referred to in section 83(2)(b) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company’s records as available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(3) Where for a period of account any reduction in value referred to in section 83(2) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company’s records as reducing sums available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(4) Where in any period of account any such transfer is made as is mentioned in section 83(3) which is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period in which it is made.

Textual Amendments

F31 Sch. 8A paras. 1, 1A-1C substituted for para. 1 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 49(2) (with Sch. 8 paras. 55(2), 57(1))

[F32 F33 2 (1) In its application to an overseas life insurance company section 89 of this Act shall have effect with the following modifications; and in those modifications any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act. U.K.

(2) Any reference to franked investment income shall be treated as a reference to UK distribution income (as defined by [F34 paragraph 5B(4) of that Schedule]).

(3) Any reference in subsection (5)(a) to income shall be construed as a reference to such of the income concerned as is attributable to the branch or agency in the United Kingdom through which the company carries on life assurance business.

(4) The reference in subsection (5)(b) to assets shall be construed as a reference to such of the assets concerned—

(a) as are—

(i) section 11(2)(b) assets;

(ii) section 11(2)(c) assets; or

(iii) assets which by virtue of section 11B of the Taxes Act 1988 are attributed to the branch or agency; or

(b) as are assets—

(i) (in a case where section 11C of that Act (other than subsection (9)) applies) of the relevant fund, or

(ii) (in a case where that section including that subsection applies) of the relevant funds,

other than assets which fall within paragraph (a) above.

(5) In subsection (5)(c) the reference to expenses shall be construed as a reference to such of the expenses concerned as are attributable to the branch or agency.

(6) In subsection (5)(d) the reference to interest shall be construed as a reference to such of the interest concerned as is so attributable.

(7) In determining for the purposes of subsection (5) whether there has been any increase or reduction in the value (whether realised or not) of assets—

(a) no regard shall be had to any period of time during which an asset does not fall within paragraph (a) or (b) of sub-paragraph (4) above; and

(b) in the case of an asset which falls within paragraph (b) of that sub-paragraph, only the specified portion of any increase or reduction in the value of the asset shall be taken into account;

[F35 and in paragraph (b) above the “specified portion” has the same meaning as in paragraph 1A(3)(b) above.]

[F36 (7A) For the purposes of this paragraph any expression to which a meaning is given by section 11A of the Taxes Act 1988 has that meaning.]

(8) Where for a period of account any item consisting of income, expenses or interest referred to in subsection (5) is not brought into account within the meaning given by subsection (6) it shall be treated as brought into account for the period if it arises in the period.

(9) Where for a period of account any increase in value referred to in subsection (5) is not brought into account within the meaning given by subsection (6) it shall be treated as brought into account for the period if it is shown in the company’s records as available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(10) Where for a period of account any reduction in value referred to in subsection (5) is not brought into account within the meaning given by subsection (6) it shall be treated as brought into account for the period if it is shown in the company’s records as reducing sums available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

F37 (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F32 Sch. 8A inserted (27.7.1993) by 1993 c. 34, s. 101(2), Sch. 10

F33 Sch. 8A inserted (27.7.1993) by 1993 c. 34, s. 101(2), Sch. 10

F34 Words in Sch. 8A para. 2(2) substituted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 35(5) (with Sch. 8 paras. 55(2), 57(1))

F35 Words in Sch. 8A para. 2(7) substituted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 49(3) (with Sch. 8 paras. 55(2), 57(1))

F36 Sch. 8A para. 2(7A) inserted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 49(4) (with Sch. 8 paras. 55(2), 57(1))

F37 Sch. 8A para. 2(11) repealed (1.5.1995 with effect in accordance with Sch. 8 para. 57 of the amending Act) by 1995 c. 4, s. 162, Sch. 29 Pt. VIII(5), note 2

Textual Amendments

F27 Sch. 8A inserted (27.7.1993) by 1993 c. 34, s. 101(2), Sch.10

Section 89A.]

[F76 SCHEDULE 8A U.K. Modification of sections 83 and 89 in relation to overseas life insurance companies

Textual Amendments

F76 Sch. 8A inserted (27.7.1993) by 1993 c. 34, s. 101(2), Sch.10

[F28 1 (1) In their application to an overseas life insurance company sections 83 and 83A of this Act shall have effect with the modifications specified in paragraphs 1A to 1C below.

(2) In those paragraphs—

(a) any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act; and

(b) any expression to which a meaning is given by section 11A of that Act has that meaning.]

Textual Amendments

F28 Sch. 8A paras. 1, 1A-1C substituted for para. 1 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 49(2) (with Sch. 8 paras. 55(2), 57(1))

[F32 F33 2 (1) In its application to an overseas life insurance company section 89 of this Act shall have effect with the following modifications; and in those modifications any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act. U.K.

(2) Any reference to franked investment income shall be treated as a reference to UK distribution income (as defined by [F34 paragraph 5B(4) of that Schedule]).

(3) Any reference in subsection (5)(a) to income shall be construed as a reference to such of the income concerned as is attributable to the branch or agency in the United Kingdom through which the company carries on life assurance business.

(4) The reference in subsection (5)(b) to assets shall be construed as a reference to such of the assets concerned—

(a) as are—

(i) section 11(2)(b) assets;

(ii) section 11(2)(c) assets; or

(iii) assets which by virtue of section 11B of the Taxes Act 1988 are attributed to the branch or agency; or

(b) as are assets—

(i) (in a case where section 11C of that Act (other than subsection (9)) applies) of the relevant fund, or

(ii) (in a case where that section including that subsection applies) of the relevant funds,

other than assets which fall within paragraph (a) above.

(5) In subsection (5)(c) the reference to expenses shall be construed as a reference to such of the expenses concerned as are attributable to the branch or agency.

(6) In subsection (5)(d) the reference to interest shall be construed as a reference to such of the interest concerned as is so attributable.

(7) In determining for the purposes of subsection (5) whether there has been any increase or reduction in the value (whether realised or not) of assets—

(a) no regard shall be had to any period of time during which an asset does not fall within paragraph (a) or (b) of sub-paragraph (4) above; and

(b) in the case of an asset which falls within paragraph (b) of that sub-paragraph, only the specified portion of any increase or reduction in the value of the asset shall be taken into account;

[F35 and in paragraph (b) above the “specified portion” has the same meaning as in paragraph 1A(3)(b) above.]

[F36 (7A) For the purposes of this paragraph any expression to which a meaning is given by section 11A of the Taxes Act 1988 has that meaning.]

(8) Where for a period of account any item consisting of income, expenses or interest referred to in subsection (5) is not brought into account within the meaning given by subsection (6) it shall be treated as brought into account for the period if it arises in the period.

(9) Where for a period of account any increase in value referred to in subsection (5) is not brought into account within the meaning given by subsection (6) it shall be treated as brought into account for the period if it is shown in the company’s records as available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(10) Where for a period of account any reduction in value referred to in subsection (5) is not brought into account within the meaning given by subsection (6) it shall be treated as brought into account for the period if it is shown in the company’s records as reducing sums available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

F37 (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F32 Sch. 8A inserted (27.7.1993) by 1993 c. 34, s. 101(2), Sch. 10

F33 Sch. 8A inserted (27.7.1993) by 1993 c. 34, s. 101(2), Sch. 10

F34 Words in Sch. 8A para. 2(2) substituted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 35(5) (with Sch. 8 paras. 55(2), 57(1))

F35 Words in Sch. 8A para. 2(7) substituted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 49(3) (with Sch. 8 paras. 55(2), 57(1))

F36 Sch. 8A para. 2(7A) inserted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. II para. 49(4) (with Sch. 8 paras. 55(2), 57(1))

F37 Sch. 8A para. 2(11) repealed (1.5.1995 with effect in accordance with Sch. 8 para. 57 of the amending Act) by 1995 c. 4, s. 162, Sch. 29 Pt. VIII(5), note 2

Section 90.

SCHEDULE 9 U.K. Life Policies Etc. Held by Companies

1 U.K. Chapter II of Part XIII of the Taxes Act 1988 shall be amended as follows.

2 U.K. At the end of section 539 there shall be added—

“(9) A policy of life insurance issued in respect of an insurance made before14th March 1989 shall be treated for the purposes of sections 540(5A), 547(8)and 548(3A) as issued in respect of one made on or after that date if it isvaried on or after that date so as to increase the benefits secured or toextend the term of the insurance; and any exercise of rights conferred by thepolicy shall be regarded for this purpose as a variation.”

3 (1) Section 540 shall be amended as follows. U.K.

(2) In subsection (4), for the words “this section” there shall besubstituted the words “subsections (1) and (3) above”.

(3) After subsection (5) there shall be inserted—

“(5A) Sub-paragraphs (i) and (ii) of subsection (1)(b) above shall not apply inrelation to a policy issued in respect of an insurance made on or after 14thMarch 1989 if, immediately before the happening of the event, the rightsconferred by the policy were in the beneficial ownership of a company, or wereheld on trusts created, or as security for a debt owed, by a company.”

4 (1) Section 541 shall be amended as follows. U.K.

(2) After subsection (4) there shall be inserted—

“(4A) Where, immediately before the happening of the chargeable event, therights conferred by a qualifying endowment policy are held as security for adebt owed by a company, then, if—

(a) the conditions in subsection (4B) below are satisfied,

(b) the amount of the debt exceeds the total amount previously paid under thepolicy by way of premiums, and

(c) the company makes a claim for the purpose within two years after the endof the accounting period in which the chargeable event happens,

this section shall have effect as if the references in subsection (1)(a)and (b) to that total amount were references to the amount of the debt.

(4B) The conditions referred to in subsection (4A) above are—

(a) that, throughout the period beginning with the making of the insurance andending immediately before the happening of the chargeable event, the rightsconferred by the policy have been held as security for a debt owed by thecompany;

(b) that the capital sum payable under the policy in the event of death duringthe term of the policy is not less than the amount of the debt when theinsurance was made;

(c) that any sum payable under the policy by reason of the chargeable eventis applied in repayment of the debt (except to the extent that its amountexceeds the amount of the debt);

(d) that the debt was incurred to defray money applied—

(i) in purchasing an estate or interest in land to be occupied by the companyfor the purposes of a trade carried on by it, or

(ii) for the purpose of the construction, extension or improvement (but not therepair or maintenance) of buildings which are or are to be so occupied.

(4C) If the amount of the debt is higher immediately before the happening ofthe chargeable event than it was at some earlier time during the periodmentioned in subsection (4B)(a) above, the amount to be taken into account forthe purposes of subsection (1) above shall be the lowest amount at which itstood during that period.

(4D) If during the period mentioned in subsection (4B)(a) above the companyincurs a debt by borrowing in order to repay another debt, subsections (4B)and (4C) above shall have effect as if, where appropriate, references toeither debt included references to the other.”

(3) In subsection (5), after paragraph (b) there shall be inserted “and

(c) “qualifying endowment policy” means a policy which is aqualifying policy by virtue of paragraph 2 of Schedule 15;”.

5 (1) Section 547 shall be amended as follows. U.K.

(2) In subsection (1), for paragraph (b) there shall be substituted—

“(b) if, immediately before the happening of that event, those rights were inthe beneficial ownership of a company, or were held on trusts created, or assecurity for a debt owed, by a company, the amount of the gain shall be deemedto form part of the company’s income (chargeable under Case VI of Schedule D)for the accounting period in which the event happened;”.

(3) After subsection (7) there shall be inserted—

“(8) Subsection (1)(b) above shall not have effect as respects—

(a) a policy of life insurance issued in respect of an insurance made before14th March 1989,

(b) a contract for a life annuity made before that date, or

(c) a capital redemption policy issued in respect of an insurance made beforethat date, or issued by a company resident in the United Kingdom in respectof an insurance made on or after that date.”

6 (1) Section 548 shall be amended as follows. U.K.

(2) In subsection (1)—

(a) in paragraph (a), after the words “an individual’s total income”there shall be inserted the words “or the income of a company”;

(b) in paragraph (c), after the words “that individual” there shall beinserted the words “or company”;

(c) for the words “subsection (3)” there shall be substituted the words “subsections (3) and (3A)”.

(3) After subsection (3) there shall be inserted—

“(3A) Subsections (1) and (2) do not apply where the rights conferred by thepolicy or contract are in the beneficial ownership of a company, or are heldon trusts created, or as security for a debt owed, by a company, if the policywas issued in respect of an insurance made before 14th March 1989 or thecontract was made before that date.”

7 U.K. In section 552, in subsection (2), after paragraph (b) there shall beinserted “or

(c) the event is a chargeable event only because of section 540(5A).”

8 U.K. Paragraph 5 above shall have effect in relation to chargeable eventshappening in any accounting period of the company concerned which begins after31st March 1989; but subject to that this Schedule shall have effect as from14th March 1989.

Section 93.

SCHEDULE 10 U.K. Deep Discount Securities: Amendments

1 Schedule 4 to the Taxes Act 1988 (deep discount securities) shall beamended as mentioned in the following provisions of this Schedule.

2 (1) Paragraph 1 shall be amended as follows.

(2) The following paragraph shall be inserted after sub-paragraph(1)(d)—

“(dd) “a deep discount security” also means any redeemable security whichhas been issued by a public body (at whatever time) at a deep discount, otherthan—

(i) a security such as is mentioned in paragraph (d)(ii) above;

(ii) a security falling within sub-paragraph (5), (6) or (7) below;”.

(3) In sub-paragraph (1)(g) after the words “the company” there shall beinserted the words “or the public body”.

(4) The following shall be inserted at the end of sub-paragraph (2)— “ This sub-paragraph applies only in the case of securities issued by acompany. ”

(5) The following sub-paragraphs shall be inserted after sub-paragraph(3)—

“(4) For the purposes of this Schedule a public body is any of the followingwhich is not a company—

(a) a government, whether of the United Kingdom or elsewhere;

(b) a public or local authority, whether in the United Kingdom or elsewhere.

(5) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued before 14th March 1989, or

(b) it was issued on or after that date but was issued under the sameprospectus as any gilt-edged security issued before that date.

(6) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued under a prospectus under which no securities were issuedbefore 14th March 1989,

(b) it was issued otherwise than on the occasion of the original issue underthe prospectus, and

(c) all the securities issued on the occasion of the original issue under theprospectus are gilt-edged securities which are not deep discount securities.

(7) A security falls within this sub-paragraph if it is not a gilt-edgedsecurity and was issued (at whatever time) under the same prospectus as anyother security which was issued before the security in question and which isnot a deep discount security.

(8) For the purposes of this Schedule “gilt-edged security”has the same meaning as it has for the purposes of the 1979 Act.”

3 The following sub-paragraph shall be inserted after paragraph 4(7)—

“(8) In the case of a deep discount security issued by a public body, thisparagraph applies where a disposal is made on or after 14th March 1989(whatever the date of acquisition).”

4 In paragraph 11(1) after the words “deep discount security” thereshall be inserted the words “issued by a company”.

5 The following paragraph shall be inserted after paragraph 11—

Where any deep discount security issued by a public body is redeemedbefore the redemption date by the body which issued it, paragraph 4 aboveshall have effect subject to paragraph 11(2) above (ignoring the wordsfollowing paragraph (b)).”

6 The following sub-paragraph shall be inserted after paragraph 13(2)—

“(3) Every public body which issues deep discount securities on or after 1stAugust 1989 shall cause to be shown on the certificate of each such securitythe income element for each income period between the date of issue of thesecurity and the redemption date.”

7 The following shall be inserted after paragraph 14—

“15 Retirement benefit schemes

“15 (1) In a case where—

(a) paragraph 4 above would apply (apart from this paragraph) to a disposalof a security, and

(b) immediately before the disposal was made the security was held for thepurposes of an exempt approved scheme (within the meaning of Chapter I of PartXIV),

that paragraph shall not apply to the disposal.

(2) Sub-paragraph (1) above shall not apply unless the disposal is made on orafter 14th March 1989.

16 Stock lending

16 (1) In a case where—

(a) a security is the subject of a transfer which falls within section 129(3),and

(b) the transfer constitutes a disposal to which (apart from this paragraph)paragraph 4 above would apply,

that paragraph shall not apply to the disposal.

(2) Sub-paragraph (1) above shall not apply unless the disposal is made on orafter 14th March 1989.

17 Trustees

17 (1) Where on the disposal by trustees of a deep discount security an amountis treated as income chargeable to tax by virtue of paragraph 4(1) above, therate at which it is chargeable shall be a rate equal to the sum of the basicrate and the additional rate for the year of assessment in which the disposalis made.

(2) Where the trustees are trustees of a scheme to which section 469 applies,sub-paragraph (1) above shall not apply if or to the extent that the amountis treated as income in the accounts of the scheme.

(3) Sub-paragraph (1) above shall not apply unless the disposal is made on orafter 14th March 1989.

18 Underwriters

18 (1) An underwriting member of Lloyd’s shall be treated for the purposes ofthis Schedule as absolutely entitled as against the trustees to the securitiesforming part of his premiums trust fund, his special reserve fund (if any) andany other trust fund required or authorised by the rules of Lloyd’s, orrequired by the underwriting agent through whom his business or any part ofit is carried on, to be kept in connection with the business.

(2) Sub-paragraph (1) above applies where a disposal is made on or after 14thMarch 1989 (whatever the date of acquisition).

(3) Where a security forms part of a premiums trust fund at the end of 31stDecember of any relevant year, for the purposes of this Schedule the trusteesof the fund shall be deemed to dispose of the security at that time; and forthis purpose relevant years are 1989 and subsequent years.

(4) Where a security forms part of a premiums trust fund at the beginning of1st January of any relevant year, for the purposes of this Schedule thetrustees of the fund shall be deemed to acquire the security at that time; andfor this purpose relevant years are 1990 and subsequent years.

(5) Sub-paragraph (6) below applies where the following state of affairsexists at the beginning of 1st January of any year or the end of 31st Decemberof any year—

(a) securities have been transferred by the trustees of a premiums trust fundin 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 tomake a transfer,

(c) securities have not been transferred in return, and

(d) section 129(3) applies to the transfer made by the trustees.

(6) The securities transferred by the trustees shall be treated for thepurposes of sub-paragraphs (3) and (4) above as if they formed part of thepremiums trust fund at the beginning of 1st January concerned or the end of31st December concerned (as the case may be).

(7) Paragraph 7 above shall have effect subject to sub-paragraph (3) above.

(8) Paragraph 7(2) above shall not apply where—

(a) the deceased was an underwriting member of Lloyd’s who died on or after14th March 1989, and

(b) immediately before his death the security concerned formed part of apremiums trust fund, a special reserve fund or any other trust fund requiredor authorised by the rules of Lloyd’s, or required by the underwriting agentthrough whom the deceased’s business or any part of it was carried on, to bekept in connection with the business.

(9) In a case where an amount treated as income chargeable to tax by virtueof paragraph 4(1) above constitutes profits or gains mentioned in section450(1)—

(a) section 450(1)(b) shall apply; and

(b) paragraph 4(1)(b) above shall not apply.

(10) For the purpose of computing income tax for the year 1987–88sub-paragraph (9) above shall have effect as if—

(a) the reference to section 450(1) were to paragraph 2 of Schedule 16 to theFinance Act 1973, and

(b) the reference to section 450(1)(b) were to paragraph 2(b) of thatSchedule.

(11) In this paragraph “business” and “premiums trustfund” have the meanings given by section 457.

19 Gilts: special rules

19 (1) In a case where—

(a) securities have been issued by a public body under a prospectus underwhich no securities were issued before 14th March 1989,

(b) some of the securities issued under the prospectus are gilt-edgedsecurities which are would-be deep discount securities,

(c) some of the securities issued under the prospectus are gilt-edgedsecurities which are not would-be deep discount securities, and

(d) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities falling within paragraph (c) above (at that time),

sub-paragraph (2) below shall apply in relation to any gilt-edgedsecurity which has been or is issued under the prospectus at any time (whetherbefore, at or after the time mentioned in paragraph (d) above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(d) above, paragraphs 4, 7, 8, 11A, 12 and 14to 18 above shall have effect as if—

(a) the security were a deep discount security,

(b) it had been issued as such (whatever the time it was issued), and

(c) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above a would-be deep discountsecurity is a security which would be a deep discount security apart fromparagraph 1(6) above.

(4) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a disposal for the purposes of the1979 Act, the death of a person competent to dispose of the security, adisposal mentioned in paragraph 18(3) above, and an acquisition mentioned inparagraph 18(4) above.

20 Non-gilts: special rules

20 (1) In a case where—

(a) all the securities issued by a public body on the occasion of the originalissue under a particular prospectus (whatever the time of the issue) areneither gilt-edged securities nor deep discount securities,

(b) some of the securities issued under the prospectus are not gilt-edgedsecurities but are new would-be deep discount securities, and

(c) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities which (looking at the state of affairs at that time) havebeen issued under the prospectus and are neither gilt-edged securities nor newwould-be deep discount securities,

sub-paragraph (2) below shall apply in relation to any security which isnot a gilt-edged security but which has been or is issued under the prospectusat any time (whether before, at or after the time mentioned in paragraph (c)above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 4, 7, 8, 11A, 12 and 14to 18 above shall have effect as if—

(a) the security were a deep discount security,

(b) it had been issued as such (whatever the time it was issued), and

(c) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above a new would-be deep discountsecurity is a security which—

(a) would be a deep discount security apart from paragraph 1(7) above, and

(b) was issued on or after 14th March 1989.

(4) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a disposal for the purposes of the1979 Act, the death of a person competent to dispose of the security, adisposal mentioned in paragraph 18(3) above, and an acquisition mentioned inparagraph 18(4) above.”

Section 94.

SCHEDULE 11 U.K. Deep Gain Securities

Modifications etc. (not altering text)

C28 Sch. 11 modified (27.7.1993) by 1993 c. 34, ss. 65(2)(4)(7)(8), 66(1)

Sch. 11 applied (27.7.1993) by 1993 c. 34, ss. 164(12), (with s. 165)

Deep gain securities U.K.

1 (1) For the purposes of this Schedule a deep gain security is a redeemable security (whenever issued) which fulfils the first and second conditions.

(2) The first condition is that, taking the security at the time it is issuedand assuming redemption, the amount payable on redemption might constitute adeep gain; and if the security is capable of redemption on one of a number ofoccasions, this condition is fulfilled if it is fulfilled as regards any oneof them.

(3) For the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity only at the option of the person who issued the security(and no other person).

[F38 (3A) In the case of a security issued before 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than in pursuance of the exercise by the person who holds the security for the time being of an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur.

(3B) In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a) the event occasioning redemption is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b) the event occasioning redemption is neither certain nor likely to occur,

(c) the event occasioning redemption is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d) the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3C) The condition set out in sub-paragraph (3B)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3D) In a case where—

(a) the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b) it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3B) above is fulfilled,

the condition concerned shall not be treated as fulfilled unless it is fulfilled having regard only to circumstances in which (judged at the time of the security’s issue) the right to convert or exchange cannot be or is unlikely to be exercised.

(3E) In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a) the event allowing the option to be exercised is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b) the event allowing the option to be exercised is neither certain nor likely to occur,

(c) the event allowing the option to be exercised is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d) the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3F) The condition set out in sub-paragraph (3E)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3G) In a case where—

(a) the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b) it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3E) above is fulfilled,

the condition concerned shall not be treated as fulfilled unless it is fulfilled having regard only to circumstances in which (judged at the time of the security’s issue) the right to convert or exchange cannot be or is unlikely to be exercised.]

(4) The second condition is that the security—

(a) is not a deep discount security (either because the amount payable onredemption is not known at issue or for some other reason),

(b) is not a share in a company,

(c) is not a qualifying indexed security,

(d) is not a convertible security, and

(e) does not fall within sub-paragraph (5), (6) or (7) below.

(5) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued before 14th March 1989, or

(b) it was issued on or after that date but was issued under the sameprospectus as any gilt-edged security issued before that date.

(6) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued under a prospectus under which no securities were issuedbefore 14th March 1989,

(b) it was issued otherwise than on the occasion of the original issue underthe prospectus, and

(c) all the securities issued on the occasion of the original issue under theprospectus are gilt-edged securities which are not deep gain securities.

(7) A security falls within this sub-paragraph if it is not a gilt-edgedsecurity and was issued (at whatever time) under the same prospectus as anyother security which was issued before the security in question and which isnot a deep gain security.

(8) For the purposes of this paragraph—

(a) a deep discount security is a security which is a deep discount securityfor the purposes of Schedule 4 to the Taxes Act 1988,

(b) “qualifying indexed security” has the meaning given byparagraph 2 below, and

(c) a gilt-edged security is a security which is a gilt-edged security for thepurposes of the M11 [F39 Taxation of Chargeable Gains Act 1992] .

(9) For the purposes of this paragraph the amount payable on redemption of asecurity constitutes a deep gain if the issue price is less than the amountso payable, and the amount by which it is less represents more than—

(a) 15 per cent. of the amount so payable, or

(b) half Y per cent. of the amount so payable, where Y is the number ofcomplete years between the date of issue and the redemption date.

(10) For the purposes of this paragraph the amount payable on redemption doesnot include any amount payable by way of interest.

Textual Amendments

F38 Sch. 11 para. 1(3A)-(3G) substituted (retrospectively and deemed always to have had effect) for para. 1(3A) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras. 2, 7, 8

F39 Words in Sch. 11 para. 1(8)(c) 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(6)(a) (with s. 60, 101(1), 201(3))

Modifications etc. (not altering text)

C29 See Finance Act 1990 (c. 29), s. 56, Sch. 10para. 11(4)–definition employed for purposes of Finance Act1990 (c. 29), Sch. 10–convertible securities

Marginal Citations

M11 1992 c. 12.

Qualifying indexed securities U.K.

2 (1) For the purposes of paragraph 1 above a qualifying indexed security is asecurity which fulfils each of the conditions set out below.

(2) The first condition is that—

(a) the security is denominated in sterling and under the terms of issue theamount payable on redemption is determined by reference to the movement of theretail prices index,

(b) the security is denominated in a currency other than sterling and underthe terms of issue the amount payable on redemption is determined by referenceto any similar general index of prices which is published by the government,or by an agent of the government, of the territory in whose currency thesecurity is denominated, or

(c) [F40 the security was quoted in the official list of arecognised stock exchange at the time it was issued], and under the terms of issue the amount payable on redemption isdetermined by reference to the movement of a published index of prices ofshares quoted in the official list of a recognised stock exchange.

(3) The second condition is that the terms of issue make no provision forconversion into, or redemption in, a currency other than that in which thesecurity is denominated on issue.

(4) The third condition is that under the terms of issue—

(a) interest is payable on the security,

(b) not more than one year can elapse between the day of issue and the firstday on which interest becomes payable, or between any day on which interestbecomes payable and the next day on which it becomes payable,

(c) the interest payable is determined by reference to a rate which is notless than a reasonable commercial rate (judged by reference to the date ofissue and by reference to securities of a similar nature to the one inquestion), and

(d) the interest payable is also determined by reference to the movement ofthe index by reference to which the amount payable on redemption isdetermined.

(5) The fourth condition is that where that index is applied to determine theamount payable on redemption or to determine interest it must, under the termsof issue, be applied precisely and without restriction.

(6) The fifth condition is that—

(a) the security is expressed to be issued for a definite period stated on theface of the security, and

(b) the period so stated commences with the day of issue and is five years ormore.

(7) The sixth condition is that the terms of issue contain no provisionenabling the person who holds the security for the time being to require anyof the following before the expiry of a period which commences with the dayof issue and which is five years or more—

(a) the security to be repurchased by the person who issued it;

(b) the security to be purchased by a person other than the person who issuedit;

(c) the security to be converted into another kind of security;

(d) the security to be redeemed in circumstances other than any of thequalifying circumstances (set out in sub-paragraph (13) below).

(8) The seventh condition is that, where the issue is handled by an agent forthe person making the issue or by an underwriter, the terms on which the agentor underwriter offers the security—

(a) contain no provision for the security to be repurchased by the person whoissued it, converted into another kind of security, or redeemed, before theexpiry of a period which commences with the day of issue and which is fiveyears or more, and

(b) contain no provision enabling the person who holds the security for thetime being to require the security to be purchased, by a person other than theperson who issued it, before the expiry of a period which commences with theday of issue and which is five years or more.

[F41 (8A) If a security was issued before 9th June 1989, was not quoted in theofficial list of a recognised stock exchange at the time it was issued, butwas quoted in such a list on 8th June 1989, for the purposes of subparagraph(2)(c) above it shall be deemed to have been quoted in that list at the timeit was issued.

(8B) If a security was issued on or after 9th June 1989, and was quoted in theofficial list of a recognised stock exchange at a time aftet it was issued butbefore the end of the qualifying period, for the purposes of sub-paragraph(2)(c) above it shall be deemed to have been quoted in that list at the timeit was issued; and the qualifying period is the period of one month beginningwith the day on which the security was issued]

(9) For the purposes of sub-paragraph (5) above “redemption” does not include any redemption which may bemade before maturity only at the option of the person who issued the security(and no other person).

(10) In a case where the amount payable on redemption, or the amount ofinterest, is under the terms of issue determined by reference to the movementof the index for a period (a notional period) in place of a later actualperiod (a process commonly known as lagging) the fourth condition shall betreated as fulfilled if the following rules are fulfilled—

(a) under the terms of issue the notional period must start not more thaneight months before the actual period starts and must end not more than eightmonths before the actual period ends, and

(b) where the index is applied for the notional period it must, under theterms of issue, be applied precisely and without restriction.

(11) In a case where the terms of issue contain provision for the amountpayable on redemption to be not less than an amount stated in the terms, theprovision shall not prevent the fourth condition being fulfilled if—

(a) the security was issued before 9th June 1989, and

(b) the amount stated does not constitute a deep gain (within the meaninggiven by paragraph 1(9) above).

[F41 (11A) In a case where the terms of issue contain provision for the amountpayable on redemption to be not less than a specified percentage of the issueprice, the provision shall not prevent the fourth condition being fulfilledif the specified percentage is not greater than 10.]

(12) In a case where—

(a) the terms of issue contain provision for the amount payable on redemptionin any of the qualifying circumstances (set out in sub-paragraph (13) below)to be not less than an amount stated in the terms, and

(b) the security was issued before 9th June 1989,

the provision shall not prevent the fourth condition being fulfilled.

[F42 (12A) In a case where—

(a) the terms of issue contain provision for the amount payable on redemptionin any of the qualifying circumstances (set out in sub-paragraph (13) below)to be not more than the issue price, and

(b) the security was issued on or after 9th June 1989,

the provision shall not prevent the fourth condition being fulfilled.]

(13) For the purposes of sub-paragraphs (7) [F43 , (12) and (12A)] above the following are qualifying circumstances—

(a) there is a fundamental change in the rules governing the index and thechange would be detrimental to the interests of the person who holds thesecurity for the time being;

(b) the index ceases to be published without being replaced by a comparableindex;

[F44 (c) in the case of a security issued before 13th November 1991, any circumstances except circumstances in which the person who holds the security for the time being exercises an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur;

(d) in the case of a security issued on or after 13th November 1991, any circumstances for redemption which may be made before maturity otherwise than at the option of the person who holds the security for the time being and as regards which the conditions set out in paragraph 1(3B) above are fulfilled (judged at the time of the security’s issue and read subject to paragraph 1(3C) and (3D) above);

(e) in the case of a security issued on or after 13th November 1991, any circumstances for redemption which may be made before maturity at the option of the person who holds the security for the time being and as regards which the conditions set out in paragraph 1(3E) above are fulfilled (judged at the time of the security’s issue and read subject to paragraph 1(3F) and (3G) above).]

(14) In a case where an issue is handled by an agent for the person making theissue, or by an underwriter, for the purposes of sub-paragraphs (2) to (5) and(10) above the terms of issue shall be taken to include any terms on which theagent or underwriter offers the security.

(15) For the purposes of this paragraph the amount payable on redemption doesnot include any amount payable by way of interest.

(16) For the purposes of this paragraph “control” (in relation to acompany) shall be construed in accordance with section 840 of the Taxes Act1988.

Textual Amendments

F40 Finance Act 1990 (c. 29), s. 58(2)(7)–deemedalways to have had effect. Previously

“the security was issued before9th June 1989 and was quoted in the official list of a recognised stockexchange on 8th June 1989”

F41 Finance Act 1990 (c. 29), s. 58(3)(4)respectively–deemed always to have had effect (subs. (7))

F42 Finance Act 1990 (c. 29), s. 58(5)(7)–deemedalways to have had effect

F43 Finance Act 1990 (c. 29), s. 58(6)(a)(7)–deemedalways to have had effect. Previously

“and (12)”

F44 Sch. 11 para. 2(13)(c)-(e) substituted(retrospectively and deemed always to have had effect) for sub-para. (13)(c)(d) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras.3, 7, 8

Convertible securities U.K.

3 (1) For the purposes of paragraph 1 above a security is a convertible securityif—

(a) it was issued by a company before 9th June 1989,

(b) under the terms of issue it can be converted into or exchanged for sharecapital in a company (whether or not the company is the one which issued thesecurity), and

(c) the condition set out in sub-paragraph (2) below is fulfilled.

(2) The condition is that—

(a) at some time in the qualifying period the security was quoted in theofficial list of a recognised stock exchange,

(b) at some time in that period relevant share capital was so quoted, or

(c) each of paragraphs (a) and (b) above is satisfied (though not necessarilyas regards the same time).

(3) For the purposes of sub-paragraph (2) above the qualifying period is theperiod of one month beginning with the day on which the security was issued.

(4) For the purposes of sub-paragraph (2) above relevant share capital isshare capital in the company into whose share capital the security can beconverted or for whose share capital the security can be exchanged; andrelevant share capital need not be share capital into or for which thesecurity can be converted or exchanged.

(5) References in this paragraph to share capital are to share capital bywhatever name called.

[F45 Issue price] U.K.

Textual Amendments

F45 Sch. 11 para. 3A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 54, Sch. 12 para.4.

[3A (1) This paragraph applies where—

(a) securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,

(b) on a later occasion securities (new securities) of the same kind are issued,

(c) a sum (the extra return) is payable in respect of each new security, by the person issuing it, to reflect the fact that interest is accruing on the old securities,

(d) the issue price of each new security includes an element (whether or not separately identified) representing payment for the extra return, and

(e) the extra return is equal to the amount of interest payable for the relevant period on each old security.

(2) In such a case, the issue price of each new security shall be deemed for the purposes of paragraph 1(9) above to be its actual issue price less an amount equal to the extra return payable in respect of the security.

(3) For the purposes of this paragraph securities are of the same kind if they are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.

(4) For the purposes of this paragraph the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are issued.

(5) For the purposes of this paragraph the relevant day is—

(a) the last (or only) interest payment day to fall in respect of the old securities before the day on which the new securities are issued, or

(b) the day on which the old securities were issued, in a case where no interest payment day fell in respect of them before the day on which the new securities are issued;

and an interest payment day, in relation to the old securities, is a day on which interest is payable under them.]

Meaning of transfer etc. U.K.

4 (1) This paragraph has effect for the purposes of this Schedule.

(2) “Transfer”, in relation to a security, means transfer by wayof sale, exchange, gift or otherwise.

[F46 (2A) But (notwithstanding sub-paragraph (2) above) “transfer”does not include a transfer made ona conversion of a security into sharecapital in a company.]

(3) Where an agreement for the transfer of a security is made, it istransferred, and the person to whom it is agreed to be transferred becomesentitled to it, when the agreement is made and not on a later transfer madepursuant to the agreement; and “entitled”, “transfer” and cognateexpressions shall be construed accordingly.

(4) A person holds a security at a particular time if he is entitled to it atthe time.

(5) A person acquires a security when he becomes entitled to it; and “acquisition” shall be construed accordingly.

(6) If an agreement is conditional (whether on the exercise of an option orotherwise) for the purposes of sub-paragraph (3) above it is made when thecondition is exercised.

Textual Amendments

F46 Finance Act 1990 (c. 29), s. 56, Sch. 10 para. 27(2),29(1)–deemed always to have had effect

Charge to tax on transfer U.K.

5 (1) This paragraph applies if—

(a) there is a transfer of a deep gain security on or after 14th March 1989(irrespective of when the person making the transfer acquired it), and

(b) the amount obtained on transfer exceeds the amount paid on acquisition.

(2) In such a case—

(a) an amount equal to the difference between those two amounts, less theamount of any costs, shall be treated as income of the person making thetransfer,

(b) the income shall be chargeable to tax under Case III or Case IV (as thecase may be) of Schedule D,

(c) the income shall be treated as arising in the year of assessment in whichthe transfer takes place, and

(d) notwithstanding anything in sections 64 to 67 of the Taxes Act 1988, thetax shall be computed on the income arising in the year of assessment forwhich the computation is made.

(3) For the purposes of this paragraph—

(a) the amount obtained on transfer is the amount obtained, in respect of thetransfer, by the person making it,

(b) the amount paid on acquisition is the amount paid by that person inrespect of his acquisition of the security (or his last acquisition of itbefore the transfer), and

(c) costs are the costs incurred by that person in connection with thetransfer and with his acquisition of the security (or his last acquisition ofit before the transfer).

(4) For the purposes of sub-paragraph (3)(a) above the person making thetransfer shall be treated as obtaining in respect of it—

(a) any amount he actually obtains in respect of it, and

(b) any amount he is entitled to obtain, but does not obtain, in respect ofit.

(5) Sub-paragraph (4) above shall not apply where paragraph 7, 8 or 9 belowapplies.

[F47 Exchange gains and losses] U.K.

Textual Amendments

F47 Sch. 11 para. 5A and crossheading inserted (27.7.1993) by 1993 c. 34, s. 170, Sch. 18 para.7

F48 5A (1) This paragraph applies where—

(a) there is a transfer or redemption of a deep gain security, and

(b) the person making the transfer or (as the case may be) the person who was entitled to the security immediately before redemption is a qualifying company.

(2) For the purposes of paragraph 5 above the amount treated as income—

(a) shall be increased by the amount of any non-trading exchange loss, or the aggregate of the amounts of any non-trading exchange losses, accruing to the company as regards the underlying right for any accrual period or periods constituting or falling within the holding period;

(b) shall (after taking account of paragraph (a) above) be reduced by the amount of any non-trading exchange gain, or the aggregate of the amounts of any non-trading exchange gains, accruing to the company as regards the underlying right for any accrual period or periods constituting or falling within the holding period.

(3) For the purposes of this paragraph—

(a) the underlying right is the right to settlement under the debt on the security;

(b) “accrual period” and “qualifying company” have the same meanings as in Chapter II of Part II of the Finance Act 1993;

(c) the question whether a non-trading exchange gain or loss accrues to the company as regards the underlying right for an accrual period shall be decided in accordance with that Chapter.

(4) For the purposes of this paragraph the holding period is the period which—

(a) begins when the company acquired (or last acquired) the security before the transfer or redemption, and

(b) ends when the transfer or redemption is made.

Textual Amendments

F48 Sch. 11 para. 5A inserted (27.7.1993) by 1993 c. 34, s. 170, Sch. 18 para.7

Redemption U.K.

6 (1) Paragraph 5 above applies where there is a redemption of a deep gainsecurity as well as where there is a transfer.

(2) In its application by virtue of sub-paragraph (1) above, paragraph 5 aboveshall have effect as if—

(a) references to the person making the transfer were to the person who wasentitled to the security immediately before redemption, and

(b) other references to transfer were to redemption.

Death U.K.

7 (1) Where an individual who is entitled to a security dies, for the purposesof this Schedule—

(a) he shall be treated as transferring it to his personal representativesimmediately before his death, and

(b) he shall be treated as obtaining in respect of the transfer an amountequal to the market value of the security at the time of the transfer.

(2) Where a security is transferred by personal representatives to a legatee,for the purposes of paragraph 5 above they shall be treated as obtaining inrespect of the transfer an amount equal to the market value of the securityat the time of the transfer.

(3) In sub-paragraph (2) above “legatee” includes any person taking (whether beneficiallyor as trustee) under a testamentary disposition or on an intestacy or partialintestacy, including any person taking by virtue of an appropriation by thepersonal representatives in or towards satisfaction of a legacy or otherinterest or share in the deceased’s property.

Modifications etc. (not altering text)

C30 Sch. 11 para. 7(1) excluded (27.7.1993 with effect for the year 1992-93 and subsequent years of assessment) by 1993 c. 34, ss. 176(3)(c), 184(3)

Connected persons U.K.

8 (1) This paragraph applies where a security is transferred from one person toanother (whether or not on or after 14th March 1989) and they are connectedwith each other.

(2) For the purposes of paragraph 5 above—

(a) the person making the transfer shall be treated as obtaining in respectof it an amount equal to the market value of the security at the time of thetransfer, and

(b) the person to whom the transfer is made shall be treated as paying inrespect of his acquisition of the security an amount equal to that marketvalue.

(3) Section 839 of the Taxes Act 1988 (connected persons) shall apply for thepurposes of this paragraph.

Market value U.K.

9 (1) This paragraph applies where a security is transferred from one person toanother (whether or not on or after 14th March 1989) and—

(a) the transfer is made for a consideration which consists of or includesconsideration not in money or money’s worth, or

(b) the transfer is made otherwise than by way of a bargain made at arm’slength.

(2) For the purposes of paragraph 5 above—

(a) the person making the transfer shall be treated as obtaining in respectof it an amount equal to the market value of the security at the time of thetransfer, and

(b) the person to whom the transfer is made shall be treated as paying inrespect of his acquisition of the security an amount equal to that marketvalue.

Underwriters U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F49 10

Textual Amendments

F49 Sch. 11 para. 10 repealed (27.7.1993 with effect for the year 1994 and subsequent underwriting years) by 1993 c. 34, s. 213, Sch. 23 Pt. III(12) Note 2

Trustees U.K.

11 (1) Where on a transfer or redemption of a security by trustees an amount istreated as income chargeable to tax by virtue of paragraph 5 above, the rateat which it is chargeable shall be [F50 the rate applicable to trusts] for the year of assessment in which the transfer ismade.

(2) Where the trustees are trustees of a scheme to which section 469 of theTaxes Act 1988 applies, sub-paragraph (1) above shall not apply if or to theextent that the amount is treated as income in the accounts of the scheme.

Textual Amendments

F50 Words in Sch. 11 para. 11(1) 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)

Foreign currency U.K.

12 (1) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount obtained on transfer would be an amount expressed in acurrency other than sterling, it shall be treated for those purposes as thesterling equivalent on the day of the transfer of the amount so expressed.

(2) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount paid on acquisition would be an amount expressed in acurrency other than sterling, it shall be treated for those purposes as thesterling equivalent on the day of the acquisition of the amount so expressed.

(3) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount of the costs incurred by a person in connection with atransfer would be an amount expressed in a currency other than sterling, itshall be treated for those purposes as the sterling equivalent on the day ofthe transfer of the amount so expressed.

(4) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount of the costs incurred by a person in connection with anacquisition would be an amount expressed in a currency other than sterling,it shall be treated for those purposes as the sterling equivalent on the dayof the acquisition of the amount so expressed.

(5) In sub-paragraphs (1) and (3) above “transfer” includes “redemption”.

(6) For the purposes of this paragraph the sterling equivalent of an amounton a particular day is the sterling equivalent calculated by reference to theLondon closing rate of exchange for that day.

Receipts in United Kingdom U.K.

13 (1) Sub-paragraph (2) below applies where—

(a) by virtue of paragraph 5(2) above an amount is treated as income of aperson and as chargeable to tax under Case IV of Schedule D, and

(b) the person satisfies the Board, on a claim in that behalf, that he is notdomiciled in the United Kingdom, or that (being a Commonwealth citizen or acitizen of the Republic of Ireland) he is not ordinarily resident in theUnited Kingdom.

(2) In such a case—

(a) any amounts received in the United Kingdom in respect of the amounttreated as income shall be treated as income arising in the year of assessmentin which they are so received, and

(b) paragraph 5(2) above shall have effect with the substitution of paragraph(a) above for paragraph 5(2)(c).

(3) For the purposes of sub-paragraph (2) above—

(a) there shall be treated as received in the United Kingdom all amounts paid,used or enjoyed in, or in any manner or form transmitted or brought to, theUnited Kingdom, and

(b) subsections (6) to (9) of section 65 of the Taxes Act 1988 shall apply asthey apply for the purposes of subsection (5) of that section.

Retirement benefit schemes U.K.

14 In a case where—

(a) paragraph 5 above would apply (apart from this paragraph) to a transferor redemption of a security, and

(b) immediately before the transfer or redemption was made the security washeld for the purposes of an exempt approved scheme (within the meaning ofChapter I of Part XIV of the Taxes Act 1988),

that paragraph shall not apply to the transfer or redemption.

Charities U.K.

15 (1) In a case where—

(a) paragraph 5 above would apply (apart from this paragraph) to a transferor redemption of a security,

(b) immediately before the transfer or redemption was made the security washeld by a charity, and

(c) the amount which would (apart from this paragraph) be treated as incomeby virtue of paragraph 5 above is applicable and applied for charitablepurposes,

that paragraph shall not apply to the transfer or redemption.

(2) In this paragraph “charity” has the same meaning as in section 506 of the TaxesAct 1988.

Stock lending U.K.

16 In a case where—

(a) a security is the subject of a transfer which falls within section 129(3)of the Taxes Act 1988, and

(b) paragraph 5 above would apply to the transfer (apart from this paragraph),

that paragraph shall not apply to the transfer.

Accrued income scheme U.K.

17 In a case where—

(a) a security is the subject of a transfer to which paragraph 5 aboveapplies, and

(b) apart from this paragraph, the transfer would be a transfer for thepurposes of sections 710 to 728 of the Taxes Act 1988,

the transfer shall not be a transfer for those purposes.

Other provisions excluded U.K.

18 In a case where paragraph 5 above applies to the redemption of a security,sections 123 and 348 to 350 of the Taxes Act 1988 shall not apply to anyproceeds of the redemption.

Identification of securities U.K.

19 Section [F51 108 of the M12 Taxation of Chargeable Gains Act 1992] shall apply to theidentification, for the purposes of this Schedule, of deep gain securitiestransferred or redeemed as it applies to the identification, for the purposesof capital gains tax, of deep discount securities disposed of.

Textual Amendments

F51 Words in Sch. 11 para. 19 substituted (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. 10 para. 19(6)(b) (with ss. 60, 101(1), 201(3))

Marginal Citations

M12 1992 c. 12.

[F52 Early redemption: special rules] U.K.

Textual Amendments

F52 Sch. 11 para 19A and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras4, 7, 8

F53 19A (1) Sub-paragraph (2) below applies where—

(a) a security is issued on or after 13th November 1991,

(b) it would be a deep gain security apart from paragraph 1(3B) or (3E) above,

(c) it is redeemed before maturity, and

(d) immediately before redemption it was held by a person connected with the person who issued it.

(2) As regards the redemption, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) Sub-paragraph (4) below applies where—

(a) the conditions set out in sub-paragraph (1)(a) to (c) above are fulfilled,

(b) the security was transferred in the period ending with redemption and beginning with the day falling one year before the day of redemption, and

(c) the transfer was by a person connected with the person who issued the security.

(4) As regards the transfer, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(5) Section 839 of the Taxes Act 1988 (connected persons) shall apply for the purposes of this paragraph.

Textual Amendments

F53 Sch. 11 para 19A and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras4, 7, 8

Gilts: special rules U.K.

20 (1) In a case where—

(a) securities have been issued under a prospectus under which no securitieswere issued before 14th March 1989,

(b) some of the securities issued under the prospectus are gilt-edgedsecurities which are would-be deep gain securities,

(c) some of the securities issued under the prospectus are gilt-edgedsecurities which are not would-be deep gain securities, and

(d) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities falling within paragraph (c) above (at that time),

sub-paragraph (2) below shall apply in relation to any gilt-edgedsecurity which has been or is issued under the prospectus at any time (whetherbefore, at or after the time mentioned in paragraph (d) above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(d) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above a would-be deep gain securityis a security which would be a deep gain security apart from paragraph 1(6)above.

(4) In sub-paragraph (1) above “gilt-edged security” has the same meaning as in paragraph1 above.

(5) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Non-gilts: special rules U.K.

21 (1) In a case where—

(a) all the securities issued on the occasion of the original issue under aparticular prospectus (whatever the time of the issue) are neither gilt-edgedsecurities nor deep gain securities,

(b) some of the securities issued under the prospectus are not gilt-edgedsecurities but are new would-be deep gain securities, and

(c) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities which (looking at the state of affairs at that time) havebeen issued under the prospectus and are neither gilt-edged securities nor newwould-be deep gain securities,

sub-paragraph (2) below shall apply in relation to any security which isnot a gilt-edged security but which has been or is issued under the prospectusat any time (whether before, at or after the time mentioned in paragraph (c)above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above [F54 , and subject to paragraph 21A below,] a new would-be deep gain security is a security which—

(a) would be a deep gain security apart from paragraph 1(7) above, and

(b) was issued on or after 14th March 1989.

(4) In sub-paragraph (1) above “gilt-edged security” has the same meaning as in paragraph1 above.

(5) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Textual Amendments

F54 Words in Sch. 11 para. 21(3) inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras. 5(1), 7, 8

[F55 21A (1) A security which (apart from this paragraph) would be a new would-be deep gain security for the purposes of paragraph 21(1) above is not such a security if the following three conditions are fulfilled.

(2) The first condition is that all the securities issued on the occasion of the original issue were issued before 13th November 1991.

(3) The second condition is that the security is issued on or after 13th November 1991.

(4) The third condition is that, even if paragraph 1(7) above did not prevent the security being a deep gain security, it would nevertheless not be a deep gain security if for the purposes of paragraph 1(2) above “redemption” did not include any redemption which may be made before maturity otherwise than in pursuance of the exercise by the person who holds the security for the time being of an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur.]

Textual Amendments

F55 Sch. 11 para. 21A inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras. 5(2), 7, 8

Indexed securities: special rules U.K.

22 (1) Sub-paragraph (2) below applies where—

(a) a qualifying indexed security has been issued,

(b) the person by whom it was issued and the person for the time being holdingit make an agreement, on or after 14th March 1989, varying the terms underwhich it is held, and

(c) the terms as varied are such that, had the security been issued on thoseterms, it would be a deep gain security.

(2) As regards any event occurring in relation to the security after theagreement is made, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

(4) In this paragraph “qualifying indexed security” has the meaning given byparagraph 2 above.

[F56 Convertible securities: special rules (1)] U.K.

Textual Amendments

F56 Finance Act 1990 (c. 29), s. 56, Sch. 10 paras. 27(3), 29(4)on and after 9 June 1989

22A (1) Sub-paragraph (2) below applies where—

(a) a security is a qualifying convertible security, for the purposes ofSchedule 10 to the Finance Act 1990, at the time of its issue,

(b) apart from paragraph 21 of Schedule 4 to the Taxes Act 1988, it would bea deep discount security at that time, and

(c) at a later time it ceases to be a qualifying convertible security for thepurposes of Schedule 10 to the Finance Act 1990.

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Convertible securities: special rules (2) U.K.

22B (1) In a case where—

(a) a security is a qualifying convertible security, for the purposes ofSchedule 10 to the Finance Act 1990, at the time of its issue, and

(b) apart from this sub-paragraph it would be a deep gain security at thattime,

then (subject to sub-paragraph(3) below) the security shall be treated,at the time of its issue and at all subsequent times, as not being a deep gainsecurity.

(2) Sub-paragraph (3) below applies where—

(a) sub-paragraph (1) above applies in the case of a security, and

(b) at a time after its issue it ceases to be a qualifying convertiblesecurity for the purposes of Schedule 10 to the Finance Act 1990.

(3) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (2)(b) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(4) For the purposes of sub-paragraph (3)above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

[F57 No particular redemption date: special rule] U.K.

Textual Amendments

F57 Sch. 11 para 22C and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras6, 7, 8

F58 22C (1) This paragraph applies to a security whose terms contain no particular date by which it is to be redeemed.

(2) In the case of such a security the following expressions, wherever they appear in this Schedule, shall be construed as if the words “before maturity” were omitted—

(a) the expression “redemption which may be made before maturity”;

(b) the expression “redemption before maturity”;

(c) the expression “redeemed before maturity”.

Textual Amendments

F58 Sch. 11 para 22C and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras6, 7, 8

Power to modify U.K.

23 (1) The Treasury may make regulations amending paragraph 2 above so as to doone or more of the following—

(a) vary any condition for the time being set out in that paragraph;

(b) omit any condition for the time being so set out;

(c) add a new condition to any for the time being so set out;

(d) substitute a condition or conditions for any condition or conditions forthe time being so set out.

(2) Regulations under sub-paragraph (1) above—

(a) shall be made by statutory instrument subject to annulment in pursuanceof a resolution of the House of Commons,

(b) shall apply where there is a transfer within the meaning of this Schedule,or a redemption, on or after such day as may be specified in the regulations,and

(c) may include such supplementary, incidental, consequential or transitionalprovisions as appear to the Treasury to be necessary or expedient.

Modifications etc. (not altering text)

C28 Sch. 11 modified (27.7.1993) by 1993 c. 34, ss. 65(2)(4)(7)(8), 66(1)

Sch. 11 applied (27.7.1993) by 1993 c. 34, ss. 164(12), (with s. 165)

Section 94.

SCHEDULE 11 U.K. Deep Gain Securities

Modifications etc. (not altering text)

C32 Sch. 11 modified (27.7.1993) by 1993 c. 34, ss. 65(2)(4)(7)(8), 66(1)

Sch. 11 applied (27.7.1993) by 1993 c. 34, ss. 164(12), (with s. 165)

Deep gain securities U.K.

1 (1) For the purposes of this Schedule a deep gain security is a redeemable security (whenever issued) which fulfils the first and second conditions.

(2) The first condition is that, taking the security at the time it is issuedand assuming redemption, the amount payable on redemption might constitute adeep gain; and if the security is capable of redemption on one of a number ofoccasions, this condition is fulfilled if it is fulfilled as regards any oneof them.

(3) For the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity only at the option of the person who issued the security(and no other person).

[F38 (3A) In the case of a security issued before 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than in pursuance of the exercise by the person who holds the security for the time being of an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur.

(3B) In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a) the event occasioning redemption is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b) the event occasioning redemption is neither certain nor likely to occur,

(c) the event occasioning redemption is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d) the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3C) The condition set out in sub-paragraph (3B)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3D) In a case where—

(a) the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b) it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3B) above is fulfilled,

the condition concerned shall not be treated as fulfilled unless it is fulfilled having regard only to circumstances in which (judged at the time of the security’s issue) the right to convert or exchange cannot be or is unlikely to be exercised.

(3E) In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a) the event allowing the option to be exercised is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b) the event allowing the option to be exercised is neither certain nor likely to occur,

(c) the event allowing the option to be exercised is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d) the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3F) The condition set out in sub-paragraph (3E)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3G) In a case where—

(a) the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b) it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3E) above is fulfilled,

the condition concerned shall not be treated as fulfilled unless it is fulfilled having regard only to circumstances in which (judged at the time of the security’s issue) the right to convert or exchange cannot be or is unlikely to be exercised.]

(4) The second condition is that the security—

(a) is not a deep discount security (either because the amount payable onredemption is not known at issue or for some other reason),

(b) is not a share in a company,

(c) is not a qualifying indexed security,

(d) is not a convertible security, and

(e) does not fall within sub-paragraph (5), (6) or (7) below.

(5) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued before 14th March 1989, or

(b) it was issued on or after that date but was issued under the sameprospectus as any gilt-edged security issued before that date.

(6) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued under a prospectus under which no securities were issuedbefore 14th March 1989,

(b) it was issued otherwise than on the occasion of the original issue underthe prospectus, and

(c) all the securities issued on the occasion of the original issue under theprospectus are gilt-edged securities which are not deep gain securities.

(7) A security falls within this sub-paragraph if it is not a gilt-edgedsecurity and was issued (at whatever time) under the same prospectus as anyother security which was issued before the security in question and which isnot a deep gain security.

(8) For the purposes of this paragraph—

(a) a deep discount security is a security which is a deep discount securityfor the purposes of Schedule 4 to the Taxes Act 1988,

(b) “qualifying indexed security” has the meaning given byparagraph 2 below, and

(c) a gilt-edged security is a security which is a gilt-edged security for thepurposes of the M11 [F39 Taxation of Chargeable Gains Act 1992] .

(9) For the purposes of this paragraph the amount payable on redemption of asecurity constitutes a deep gain if the issue price is less than the amountso payable, and the amount by which it is less represents more than—

(a) 15 per cent. of the amount so payable, or

(b) half Y per cent. of the amount so payable, where Y is the number ofcomplete years between the date of issue and the redemption date.

(10) For the purposes of this paragraph the amount payable on redemption doesnot include any amount payable by way of interest.

Textual Amendments

F38 Sch. 11 para. 1(3A)-(3G) substituted (retrospectively and deemed always to have had effect) for para. 1(3A) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras. 2, 7, 8

F39 Words in Sch. 11 para. 1(8)(c) 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(6)(a) (with s. 60, 101(1), 201(3))

Modifications etc. (not altering text)

C29 See Finance Act 1990 (c. 29), s. 56, Sch. 10para. 11(4)–definition employed for purposes of Finance Act1990 (c. 29), Sch. 10–convertible securities

Marginal Citations

M11 1992 c. 12.

Qualifying indexed securities U.K.

2 (1) For the purposes of paragraph 1 above a qualifying indexed security is asecurity which fulfils each of the conditions set out below.

(2) The first condition is that—

(a) the security is denominated in sterling and under the terms of issue theamount payable on redemption is determined by reference to the movement of theretail prices index,

(b) the security is denominated in a currency other than sterling and underthe terms of issue the amount payable on redemption is determined by referenceto any similar general index of prices which is published by the government,or by an agent of the government, of the territory in whose currency thesecurity is denominated, or

(c) [F40 the security was quoted in the official list of arecognised stock exchange at the time it was issued], and under the terms of issue the amount payable on redemption isdetermined by reference to the movement of a published index of prices ofshares quoted in the official list of a recognised stock exchange.

(3) The second condition is that the terms of issue make no provision forconversion into, or redemption in, a currency other than that in which thesecurity is denominated on issue.

(4) The third condition is that under the terms of issue—

(a) interest is payable on the security,

(b) not more than one year can elapse between the day of issue and the firstday on which interest becomes payable, or between any day on which interestbecomes payable and the next day on which it becomes payable,

(c) the interest payable is determined by reference to a rate which is notless than a reasonable commercial rate (judged by reference to the date ofissue and by reference to securities of a similar nature to the one inquestion), and

(d) the interest payable is also determined by reference to the movement ofthe index by reference to which the amount payable on redemption isdetermined.

(5) The fourth condition is that where that index is applied to determine theamount payable on redemption or to determine interest it must, under the termsof issue, be applied precisely and without restriction.

(6) The fifth condition is that—

(a) the security is expressed to be issued for a definite period stated on theface of the security, and

(b) the period so stated commences with the day of issue and is five years ormore.

(7) The sixth condition is that the terms of issue contain no provisionenabling the person who holds the security for the time being to require anyof the following before the expiry of a period which commences with the dayof issue and which is five years or more—

(a) the security to be repurchased by the person who issued it;

(b) the security to be purchased by a person other than the person who issuedit;

(c) the security to be converted into another kind of security;

(d) the security to be redeemed in circumstances other than any of thequalifying circumstances (set out in sub-paragraph (13) below).

(8) The seventh condition is that, where the issue is handled by an agent forthe person making the issue or by an underwriter, the terms on which the agentor underwriter offers the security—

(a) contain no provision for the security to be repurchased by the person whoissued it, converted into another kind of security, or redeemed, before theexpiry of a period which commences with the day of issue and which is fiveyears or more, and

(b) contain no provision enabling the person who holds the security for thetime being to require the security to be purchased, by a person other than theperson who issued it, before the expiry of a period which commences with theday of issue and which is five years or more.

[F41 (8A) If a security was issued before 9th June 1989, was not quoted in theofficial list of a recognised stock exchange at the time it was issued, butwas quoted in such a list on 8th June 1989, for the purposes of subparagraph(2)(c) above it shall be deemed to have been quoted in that list at the timeit was issued.

(8B) If a security was issued on or after 9th June 1989, and was quoted in theofficial list of a recognised stock exchange at a time aftet it was issued butbefore the end of the qualifying period, for the purposes of sub-paragraph(2)(c) above it shall be deemed to have been quoted in that list at the timeit was issued; and the qualifying period is the period of one month beginningwith the day on which the security was issued]

(9) For the purposes of sub-paragraph (5) above “redemption” does not include any redemption which may bemade before maturity only at the option of the person who issued the security(and no other person).

(10) In a case where the amount payable on redemption, or the amount ofinterest, is under the terms of issue determined by reference to the movementof the index for a period (a notional period) in place of a later actualperiod (a process commonly known as lagging) the fourth condition shall betreated as fulfilled if the following rules are fulfilled—

(a) under the terms of issue the notional period must start not more thaneight months before the actual period starts and must end not more than eightmonths before the actual period ends, and

(b) where the index is applied for the notional period it must, under theterms of issue, be applied precisely and without restriction.

(11) In a case where the terms of issue contain provision for the amountpayable on redemption to be not less than an amount stated in the terms, theprovision shall not prevent the fourth condition being fulfilled if—

(a) the security was issued before 9th June 1989, and

(b) the amount stated does not constitute a deep gain (within the meaninggiven by paragraph 1(9) above).

[F41 (11A) In a case where the terms of issue contain provision for the amountpayable on redemption to be not less than a specified percentage of the issueprice, the provision shall not prevent the fourth condition being fulfilledif the specified percentage is not greater than 10.]

(12) In a case where—

(a) the terms of issue contain provision for the amount payable on redemptionin any of the qualifying circumstances (set out in sub-paragraph (13) below)to be not less than an amount stated in the terms, and

(b) the security was issued before 9th June 1989,

the provision shall not prevent the fourth condition being fulfilled.

[F42 (12A) In a case where—

(a) the terms of issue contain provision for the amount payable on redemptionin any of the qualifying circumstances (set out in sub-paragraph (13) below)to be not more than the issue price, and

(b) the security was issued on or after 9th June 1989,

the provision shall not prevent the fourth condition being fulfilled.]

(13) For the purposes of sub-paragraphs (7) [F43 , (12) and (12A)] above the following are qualifying circumstances—

(a) there is a fundamental change in the rules governing the index and thechange would be detrimental to the interests of the person who holds thesecurity for the time being;

(b) the index ceases to be published without being replaced by a comparableindex;

[F44 (c) in the case of a security issued before 13th November 1991, any circumstances except circumstances in which the person who holds the security for the time being exercises an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur;

(d) in the case of a security issued on or after 13th November 1991, any circumstances for redemption which may be made before maturity otherwise than at the option of the person who holds the security for the time being and as regards which the conditions set out in paragraph 1(3B) above are fulfilled (judged at the time of the security’s issue and read subject to paragraph 1(3C) and (3D) above);

(e) in the case of a security issued on or after 13th November 1991, any circumstances for redemption which may be made before maturity at the option of the person who holds the security for the time being and as regards which the conditions set out in paragraph 1(3E) above are fulfilled (judged at the time of the security’s issue and read subject to paragraph 1(3F) and (3G) above).]

(14) In a case where an issue is handled by an agent for the person making theissue, or by an underwriter, for the purposes of sub-paragraphs (2) to (5) and(10) above the terms of issue shall be taken to include any terms on which theagent or underwriter offers the security.

(15) For the purposes of this paragraph the amount payable on redemption doesnot include any amount payable by way of interest.

(16) For the purposes of this paragraph “control” (in relation to acompany) shall be construed in accordance with section 840 of the Taxes Act1988.

Textual Amendments

F40 Finance Act 1990 (c. 29), s. 58(2)(7)–deemedalways to have had effect. Previously

“the security was issued before9th June 1989 and was quoted in the official list of a recognised stockexchange on 8th June 1989”

F41 Finance Act 1990 (c. 29), s. 58(3)(4)respectively–deemed always to have had effect (subs. (7))

F42 Finance Act 1990 (c. 29), s. 58(5)(7)–deemedalways to have had effect

F43 Finance Act 1990 (c. 29), s. 58(6)(a)(7)–deemedalways to have had effect. Previously

“and (12)”

F44 Sch. 11 para. 2(13)(c)-(e) substituted(retrospectively and deemed always to have had effect) for sub-para. (13)(c)(d) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras.3, 7, 8

Convertible securities U.K.

3 (1) For the purposes of paragraph 1 above a security is a convertible securityif—

(a) it was issued by a company before 9th June 1989,

(b) under the terms of issue it can be converted into or exchanged for sharecapital in a company (whether or not the company is the one which issued thesecurity), and

(c) the condition set out in sub-paragraph (2) below is fulfilled.

(2) The condition is that—

(a) at some time in the qualifying period the security was quoted in theofficial list of a recognised stock exchange,

(b) at some time in that period relevant share capital was so quoted, or

(c) each of paragraphs (a) and (b) above is satisfied (though not necessarilyas regards the same time).

(3) For the purposes of sub-paragraph (2) above the qualifying period is theperiod of one month beginning with the day on which the security was issued.

(4) For the purposes of sub-paragraph (2) above relevant share capital isshare capital in the company into whose share capital the security can beconverted or for whose share capital the security can be exchanged; andrelevant share capital need not be share capital into or for which thesecurity can be converted or exchanged.

(5) References in this paragraph to share capital are to share capital bywhatever name called.

Meaning of transfer etc. U.K.

4 (1) This paragraph has effect for the purposes of this Schedule.

(2) “Transfer”, in relation to a security, means transfer by wayof sale, exchange, gift or otherwise.

[F46 (2A) But (notwithstanding sub-paragraph (2) above) “transfer”does not include a transfer made ona conversion of a security into sharecapital in a company.]

(3) Where an agreement for the transfer of a security is made, it istransferred, and the person to whom it is agreed to be transferred becomesentitled to it, when the agreement is made and not on a later transfer madepursuant to the agreement; and “entitled”, “transfer” and cognateexpressions shall be construed accordingly.

(4) A person holds a security at a particular time if he is entitled to it atthe time.

(5) A person acquires a security when he becomes entitled to it; and “acquisition” shall be construed accordingly.

(6) If an agreement is conditional (whether on the exercise of an option orotherwise) for the purposes of sub-paragraph (3) above it is made when thecondition is exercised.

Textual Amendments

F46 Finance Act 1990 (c. 29), s. 56, Sch. 10 para. 27(2),29(1)–deemed always to have had effect

Charge to tax on transfer U.K.

5 (1) This paragraph applies if—

(a) there is a transfer of a deep gain security on or after 14th March 1989(irrespective of when the person making the transfer acquired it), and

(b) the amount obtained on transfer exceeds the amount paid on acquisition.

(2) In such a case—

(a) an amount equal to the difference between those two amounts, less theamount of any costs, shall be treated as income of the person making thetransfer,

(b) the income shall be chargeable to tax under Case III or Case IV (as thecase may be) of Schedule D,

(c) the income shall be treated as arising in the year of assessment in whichthe transfer takes place, and

(d) notwithstanding anything in sections 64 to 67 of the Taxes Act 1988, thetax shall be computed on the income arising in the year of assessment forwhich the computation is made.

(3) For the purposes of this paragraph—

(a) the amount obtained on transfer is the amount obtained, in respect of thetransfer, by the person making it,

(b) the amount paid on acquisition is the amount paid by that person inrespect of his acquisition of the security (or his last acquisition of itbefore the transfer), and

(c) costs are the costs incurred by that person in connection with thetransfer and with his acquisition of the security (or his last acquisition ofit before the transfer).

(4) For the purposes of sub-paragraph (3)(a) above the person making thetransfer shall be treated as obtaining in respect of it—

(a) any amount he actually obtains in respect of it, and

(b) any amount he is entitled to obtain, but does not obtain, in respect ofit.

(5) Sub-paragraph (4) above shall not apply where paragraph 7, 8 or 9 belowapplies.

Redemption U.K.

6 (1) Paragraph 5 above applies where there is a redemption of a deep gainsecurity as well as where there is a transfer.

(2) In its application by virtue of sub-paragraph (1) above, paragraph 5 aboveshall have effect as if—

(a) references to the person making the transfer were to the person who wasentitled to the security immediately before redemption, and

(b) other references to transfer were to redemption.

Death U.K.

7 (1) Where an individual who is entitled to a security dies, for the purposesof this Schedule—

(a) he shall be treated as transferring it to his personal representativesimmediately before his death, and

(b) he shall be treated as obtaining in respect of the transfer an amountequal to the market value of the security at the time of the transfer.

(2) Where a security is transferred by personal representatives to a legatee,for the purposes of paragraph 5 above they shall be treated as obtaining inrespect of the transfer an amount equal to the market value of the securityat the time of the transfer.

(3) In sub-paragraph (2) above “legatee” includes any person taking (whether beneficiallyor as trustee) under a testamentary disposition or on an intestacy or partialintestacy, including any person taking by virtue of an appropriation by thepersonal representatives in or towards satisfaction of a legacy or otherinterest or share in the deceased’s property.

Modifications etc. (not altering text)

C30 Sch. 11 para. 7(1) excluded (27.7.1993 with effect for the year 1992-93 and subsequent years of assessment) by 1993 c. 34, ss. 176(3)(c), 184(3)

Connected persons U.K.

8 (1) This paragraph applies where a security is transferred from one person toanother (whether or not on or after 14th March 1989) and they are connectedwith each other.

(2) For the purposes of paragraph 5 above—

(a) the person making the transfer shall be treated as obtaining in respectof it an amount equal to the market value of the security at the time of thetransfer, and

(b) the person to whom the transfer is made shall be treated as paying inrespect of his acquisition of the security an amount equal to that marketvalue.

(3) Section 839 of the Taxes Act 1988 (connected persons) shall apply for thepurposes of this paragraph.

Market value U.K.

9 (1) This paragraph applies where a security is transferred from one person toanother (whether or not on or after 14th March 1989) and—

(a) the transfer is made for a consideration which consists of or includesconsideration not in money or money’s worth, or

(b) the transfer is made otherwise than by way of a bargain made at arm’slength.

(2) For the purposes of paragraph 5 above—

(a) the person making the transfer shall be treated as obtaining in respectof it an amount equal to the market value of the security at the time of thetransfer, and

(b) the person to whom the transfer is made shall be treated as paying inrespect of his acquisition of the security an amount equal to that marketvalue.

Underwriters U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F49 10

Textual Amendments

F49 Sch. 11 para. 10 repealed (27.7.1993 with effect for the year 1994 and subsequent underwriting years) by 1993 c. 34, s. 213, Sch. 23 Pt. III(12) Note 2

Trustees U.K.

11 (1) Where on a transfer or redemption of a security by trustees an amount istreated as income chargeable to tax by virtue of paragraph 5 above, the rateat which it is chargeable shall be [F50 the rate applicable to trusts] for the year of assessment in which the transfer ismade.

(2) Where the trustees are trustees of a scheme to which section 469 of theTaxes Act 1988 applies, sub-paragraph (1) above shall not apply if or to theextent that the amount is treated as income in the accounts of the scheme.

Textual Amendments

F50 Words in Sch. 11 para. 11(1) 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)

Foreign currency U.K.

12 (1) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount obtained on transfer would be an amount expressed in acurrency other than sterling, it shall be treated for those purposes as thesterling equivalent on the day of the transfer of the amount so expressed.

(2) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount paid on acquisition would be an amount expressed in acurrency other than sterling, it shall be treated for those purposes as thesterling equivalent on the day of the acquisition of the amount so expressed.

(3) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount of the costs incurred by a person in connection with atransfer would be an amount expressed in a currency other than sterling, itshall be treated for those purposes as the sterling equivalent on the day ofthe transfer of the amount so expressed.

(4) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount of the costs incurred by a person in connection with anacquisition would be an amount expressed in a currency other than sterling,it shall be treated for those purposes as the sterling equivalent on the dayof the acquisition of the amount so expressed.

(5) In sub-paragraphs (1) and (3) above “transfer” includes “redemption”.

(6) For the purposes of this paragraph the sterling equivalent of an amounton a particular day is the sterling equivalent calculated by reference to theLondon closing rate of exchange for that day.

Receipts in United Kingdom U.K.

13 (1) Sub-paragraph (2) below applies where—

(a) by virtue of paragraph 5(2) above an amount is treated as income of aperson and as chargeable to tax under Case IV of Schedule D, and

(b) the person satisfies the Board, on a claim in that behalf, that he is notdomiciled in the United Kingdom, or that (being a Commonwealth citizen or acitizen of the Republic of Ireland) he is not ordinarily resident in theUnited Kingdom.

(2) In such a case—

(a) any amounts received in the United Kingdom in respect of the amounttreated as income shall be treated as income arising in the year of assessmentin which they are so received, and

(b) paragraph 5(2) above shall have effect with the substitution of paragraph(a) above for paragraph 5(2)(c).

(3) For the purposes of sub-paragraph (2) above—

(a) there shall be treated as received in the United Kingdom all amounts paid,used or enjoyed in, or in any manner or form transmitted or brought to, theUnited Kingdom, and

(b) subsections (6) to (9) of section 65 of the Taxes Act 1988 shall apply asthey apply for the purposes of subsection (5) of that section.

Retirement benefit schemes U.K.

14 In a case where—

(a) paragraph 5 above would apply (apart from this paragraph) to a transferor redemption of a security, and

(b) immediately before the transfer or redemption was made the security washeld for the purposes of an exempt approved scheme (within the meaning ofChapter I of Part XIV of the Taxes Act 1988),

that paragraph shall not apply to the transfer or redemption.

Charities U.K.

15 (1) In a case where—

(a) paragraph 5 above would apply (apart from this paragraph) to a transferor redemption of a security,

(b) immediately before the transfer or redemption was made the security washeld by a charity, and

(c) the amount which would (apart from this paragraph) be treated as incomeby virtue of paragraph 5 above is applicable and applied for charitablepurposes,

that paragraph shall not apply to the transfer or redemption.

(2) In this paragraph “charity” has the same meaning as in section 506 of the TaxesAct 1988.

Stock lending U.K.

16 In a case where—

(a) a security is the subject of a transfer which falls within section 129(3)of the Taxes Act 1988, and

(b) paragraph 5 above would apply to the transfer (apart from this paragraph),

that paragraph shall not apply to the transfer.

Accrued income scheme U.K.

17 In a case where—

(a) a security is the subject of a transfer to which paragraph 5 aboveapplies, and

(b) apart from this paragraph, the transfer would be a transfer for thepurposes of sections 710 to 728 of the Taxes Act 1988,

the transfer shall not be a transfer for those purposes.

Other provisions excluded U.K.

18 In a case where paragraph 5 above applies to the redemption of a security,sections 123 and 348 to 350 of the Taxes Act 1988 shall not apply to anyproceeds of the redemption.

Identification of securities U.K.

19 Section [F51 108 of the M12 Taxation of Chargeable Gains Act 1992] shall apply to theidentification, for the purposes of this Schedule, of deep gain securitiestransferred or redeemed as it applies to the identification, for the purposesof capital gains tax, of deep discount securities disposed of.

Textual Amendments

F51 Words in Sch. 11 para. 19 substituted (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. 10 para. 19(6)(b) (with ss. 60, 101(1), 201(3))

Marginal Citations

M12 1992 c. 12.

[F52 Early redemption: special rules] U.K.

Textual Amendments

F52 Sch. 11 para 19A and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras4, 7, 8

F53 19A (1) Sub-paragraph (2) below applies where—

(a) a security is issued on or after 13th November 1991,

(b) it would be a deep gain security apart from paragraph 1(3B) or (3E) above,

(c) it is redeemed before maturity, and

(d) immediately before redemption it was held by a person connected with the person who issued it.

(2) As regards the redemption, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) Sub-paragraph (4) below applies where—

(a) the conditions set out in sub-paragraph (1)(a) to (c) above are fulfilled,

(b) the security was transferred in the period ending with redemption and beginning with the day falling one year before the day of redemption, and

(c) the transfer was by a person connected with the person who issued the security.

(4) As regards the transfer, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(5) Section 839 of the Taxes Act 1988 (connected persons) shall apply for the purposes of this paragraph.

Textual Amendments

F53 Sch. 11 para 19A and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras4, 7, 8

Gilts: special rules U.K.

20 (1) In a case where—

(a) securities have been issued under a prospectus under which no securitieswere issued before 14th March 1989,

(b) some of the securities issued under the prospectus are gilt-edgedsecurities which are would-be deep gain securities,

(c) some of the securities issued under the prospectus are gilt-edgedsecurities which are not would-be deep gain securities, and

(d) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities falling within paragraph (c) above (at that time),

sub-paragraph (2) below shall apply in relation to any gilt-edgedsecurity which has been or is issued under the prospectus at any time (whetherbefore, at or after the time mentioned in paragraph (d) above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(d) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above a would-be deep gain securityis a security which would be a deep gain security apart from paragraph 1(6)above.

(4) In sub-paragraph (1) above “gilt-edged security” has the same meaning as in paragraph1 above.

(5) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Non-gilts: special rules U.K.

21 (1) In a case where—

(a) all the securities issued on the occasion of the original issue under aparticular prospectus (whatever the time of the issue) are neither gilt-edgedsecurities nor deep gain securities,

(b) some of the securities issued under the prospectus are not gilt-edgedsecurities but are new would-be deep gain securities, and

(c) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities which (looking at the state of affairs at that time) havebeen issued under the prospectus and are neither gilt-edged securities nor newwould-be deep gain securities,

sub-paragraph (2) below shall apply in relation to any security which isnot a gilt-edged security but which has been or is issued under the prospectusat any time (whether before, at or after the time mentioned in paragraph (c)above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above [F54 , and subject to paragraph 21A below,] a new would-be deep gain security is a security which—

(a) would be a deep gain security apart from paragraph 1(7) above, and

(b) was issued on or after 14th March 1989.

(4) In sub-paragraph (1) above “gilt-edged security” has the same meaning as in paragraph1 above.

(5) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Textual Amendments

F54 Words in Sch. 11 para. 21(3) inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras. 5(1), 7, 8

[F55 21A (1) A security which (apart from this paragraph) would be a new would-be deep gain security for the purposes of paragraph 21(1) above is not such a security if the following three conditions are fulfilled.

(2) The first condition is that all the securities issued on the occasion of the original issue were issued before 13th November 1991.

(3) The second condition is that the security is issued on or after 13th November 1991.

(4) The third condition is that, even if paragraph 1(7) above did not prevent the security being a deep gain security, it would nevertheless not be a deep gain security if for the purposes of paragraph 1(2) above “redemption” did not include any redemption which may be made before maturity otherwise than in pursuance of the exercise by the person who holds the security for the time being of an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur.]

Textual Amendments

F55 Sch. 11 para. 21A inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras. 5(2), 7, 8

Indexed securities: special rules U.K.

22 (1) Sub-paragraph (2) below applies where—

(a) a qualifying indexed security has been issued,

(b) the person by whom it was issued and the person for the time being holdingit make an agreement, on or after 14th March 1989, varying the terms underwhich it is held, and

(c) the terms as varied are such that, had the security been issued on thoseterms, it would be a deep gain security.

(2) As regards any event occurring in relation to the security after theagreement is made, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

(4) In this paragraph “qualifying indexed security” has the meaning given byparagraph 2 above.

[F56 Convertible securities: special rules (1)] U.K.

Textual Amendments

F56 Finance Act 1990 (c. 29), s. 56, Sch. 10 paras. 27(3), 29(4)on and after 9 June 1989

22A (1) Sub-paragraph (2) below applies where—

(a) a security is a qualifying convertible security, for the purposes ofSchedule 10 to the Finance Act 1990, at the time of its issue,

(b) apart from paragraph 21 of Schedule 4 to the Taxes Act 1988, it would bea deep discount security at that time, and

(c) at a later time it ceases to be a qualifying convertible security for thepurposes of Schedule 10 to the Finance Act 1990.

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Convertible securities: special rules (2) U.K.

22B (1) In a case where—

(a) a security is a qualifying convertible security, for the purposes ofSchedule 10 to the Finance Act 1990, at the time of its issue, and

(b) apart from this sub-paragraph it would be a deep gain security at thattime,

then (subject to sub-paragraph(3) below) the security shall be treated,at the time of its issue and at all subsequent times, as not being a deep gainsecurity.

(2) Sub-paragraph (3) below applies where—

(a) sub-paragraph (1) above applies in the case of a security, and

(b) at a time after its issue it ceases to be a qualifying convertiblesecurity for the purposes of Schedule 10 to the Finance Act 1990.

(3) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (2)(b) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(4) For the purposes of sub-paragraph (3)above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

[F57 No particular redemption date: special rule] U.K.

Textual Amendments

F57 Sch. 11 para 22C and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras6, 7, 8

F58 22C (1) This paragraph applies to a security whose terms contain no particular date by which it is to be redeemed.

(2) In the case of such a security the following expressions, wherever they appear in this Schedule, shall be construed as if the words “before maturity” were omitted—

(a) the expression “redemption which may be made before maturity”;

(b) the expression “redemption before maturity”;

(c) the expression “redeemed before maturity”.

Textual Amendments

F58 Sch. 11 para 22C and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras6, 7, 8

Power to modify U.K.

23 (1) The Treasury may make regulations amending paragraph 2 above so as to doone or more of the following—

(a) vary any condition for the time being set out in that paragraph;

(b) omit any condition for the time being so set out;

(c) add a new condition to any for the time being so set out;

(d) substitute a condition or conditions for any condition or conditions forthe time being so set out.

(2) Regulations under sub-paragraph (1) above—

(a) shall be made by statutory instrument subject to annulment in pursuanceof a resolution of the House of Commons,

(b) shall apply where there is a transfer within the meaning of this Schedule,or a redemption, on or after such day as may be specified in the regulations,and

(c) may include such supplementary, incidental, consequential or transitionalprovisions as appear to the Treasury to be necessary or expedient.

Modifications etc. (not altering text)

C32 Sch. 11 modified (27.7.1993) by 1993 c. 34, ss. 65(2)(4)(7)(8), 66(1)

Sch. 11 applied (27.7.1993) by 1993 c. 34, ss. 164(12), (with s. 165)

Section 94.

SCHEDULE 11 U.K. Deep Gain Securities

Modifications etc. (not altering text)

C33 Sch. 11 modified (27.7.1993) by 1993 c. 34, ss. 65(2)(4)(7)(8), 66(1)

Sch. 11 applied (27.7.1993) by 1993 c. 34, ss. 164(12), (with s. 165)

Deep gain securities U.K.

1 (1) For the purposes of this Schedule a deep gain security is a redeemable security (whenever issued) which fulfils the first and second conditions.

(2) The first condition is that, taking the security at the time it is issuedand assuming redemption, the amount payable on redemption might constitute adeep gain; and if the security is capable of redemption on one of a number ofoccasions, this condition is fulfilled if it is fulfilled as regards any oneof them.

(3) For the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity only at the option of the person who issued the security(and no other person).

[F38 (3A) In the case of a security issued before 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than in pursuance of the exercise by the person who holds the security for the time being of an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur.

(3B) In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a) the event occasioning redemption is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b) the event occasioning redemption is neither certain nor likely to occur,

(c) the event occasioning redemption is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d) the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3C) The condition set out in sub-paragraph (3B)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3D) In a case where—

(a) the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b) it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3B) above is fulfilled,

the condition concerned shall not be treated as fulfilled unless it is fulfilled having regard only to circumstances in which (judged at the time of the security’s issue) the right to convert or exchange cannot be or is unlikely to be exercised.

(3E) In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a) the event allowing the option to be exercised is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b) the event allowing the option to be exercised is neither certain nor likely to occur,

(c) the event allowing the option to be exercised is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d) the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3F) The condition set out in sub-paragraph (3E)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3G) In a case where—

(a) the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b) it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3E) above is fulfilled,

the condition concerned shall not be treated as fulfilled unless it is fulfilled having regard only to circumstances in which (judged at the time of the security’s issue) the right to convert or exchange cannot be or is unlikely to be exercised.]

(4) The second condition is that the security—

(a) is not a deep discount security (either because the amount payable onredemption is not known at issue or for some other reason),

(b) is not a share in a company,

(c) is not a qualifying indexed security,

(d) is not a convertible security, and

(e) does not fall within sub-paragraph (5), (6) or (7) below.

(5) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued before 14th March 1989, or

(b) it was issued on or after that date but was issued under the sameprospectus as any gilt-edged security issued before that date.

(6) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued under a prospectus under which no securities were issuedbefore 14th March 1989,

(b) it was issued otherwise than on the occasion of the original issue underthe prospectus, and

(c) all the securities issued on the occasion of the original issue under theprospectus are gilt-edged securities which are not deep gain securities.

(7) A security falls within this sub-paragraph if it is not a gilt-edgedsecurity and was issued (at whatever time) under the same prospectus as anyother security which was issued before the security in question and which isnot a deep gain security.

(8) For the purposes of this paragraph—

(a) a deep discount security is a security which is a deep discount securityfor the purposes of Schedule 4 to the Taxes Act 1988,

(b) “qualifying indexed security” has the meaning given byparagraph 2 below, and

(c) a gilt-edged security is a security which is a gilt-edged security for thepurposes of the M11 [F39 Taxation of Chargeable Gains Act 1992] .

(9) For the purposes of this paragraph the amount payable on redemption of asecurity constitutes a deep gain if the issue price is less than the amountso payable, and the amount by which it is less represents more than—

(a) 15 per cent. of the amount so payable, or

(b) half Y per cent. of the amount so payable, where Y is the number ofcomplete years between the date of issue and the redemption date.

(10) For the purposes of this paragraph the amount payable on redemption doesnot include any amount payable by way of interest.

Textual Amendments

F38 Sch. 11 para. 1(3A)-(3G) substituted (retrospectively and deemed always to have had effect) for para. 1(3A) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras. 2, 7, 8

F39 Words in Sch. 11 para. 1(8)(c) 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(6)(a) (with s. 60, 101(1), 201(3))

Modifications etc. (not altering text)

C29 See Finance Act 1990 (c. 29), s. 56, Sch. 10para. 11(4)–definition employed for purposes of Finance Act1990 (c. 29), Sch. 10–convertible securities

Marginal Citations

M11 1992 c. 12.

Qualifying indexed securities U.K.

2 (1) For the purposes of paragraph 1 above a qualifying indexed security is asecurity which fulfils each of the conditions set out below.

(2) The first condition is that—

(a) the security is denominated in sterling and under the terms of issue theamount payable on redemption is determined by reference to the movement of theretail prices index,

(b) the security is denominated in a currency other than sterling and underthe terms of issue the amount payable on redemption is determined by referenceto any similar general index of prices which is published by the government,or by an agent of the government, of the territory in whose currency thesecurity is denominated, or

(c) [F40 the security was quoted in the official list of arecognised stock exchange at the time it was issued], and under the terms of issue the amount payable on redemption isdetermined by reference to the movement of a published index of prices ofshares quoted in the official list of a recognised stock exchange.

(3) The second condition is that the terms of issue make no provision forconversion into, or redemption in, a currency other than that in which thesecurity is denominated on issue.

(4) The third condition is that under the terms of issue—

(a) interest is payable on the security,

(b) not more than one year can elapse between the day of issue and the firstday on which interest becomes payable, or between any day on which interestbecomes payable and the next day on which it becomes payable,

(c) the interest payable is determined by reference to a rate which is notless than a reasonable commercial rate (judged by reference to the date ofissue and by reference to securities of a similar nature to the one inquestion), and

(d) the interest payable is also determined by reference to the movement ofthe index by reference to which the amount payable on redemption isdetermined.

(5) The fourth condition is that where that index is applied to determine theamount payable on redemption or to determine interest it must, under the termsof issue, be applied precisely and without restriction.

(6) The fifth condition is that—

(a) the security is expressed to be issued for a definite period stated on theface of the security, and

(b) the period so stated commences with the day of issue and is five years ormore.

(7) The sixth condition is that the terms of issue contain no provisionenabling the person who holds the security for the time being to require anyof the following before the expiry of a period which commences with the dayof issue and which is five years or more—

(a) the security to be repurchased by the person who issued it;

(b) the security to be purchased by a person other than the person who issuedit;

(c) the security to be converted into another kind of security;

(d) the security to be redeemed in circumstances other than any of thequalifying circumstances (set out in sub-paragraph (13) below).

(8) The seventh condition is that, where the issue is handled by an agent forthe person making the issue or by an underwriter, the terms on which the agentor underwriter offers the security—

(a) contain no provision for the security to be repurchased by the person whoissued it, converted into another kind of security, or redeemed, before theexpiry of a period which commences with the day of issue and which is fiveyears or more, and

(b) contain no provision enabling the person who holds the security for thetime being to require the security to be purchased, by a person other than theperson who issued it, before the expiry of a period which commences with theday of issue and which is five years or more.

[F41 (8A) If a security was issued before 9th June 1989, was not quoted in theofficial list of a recognised stock exchange at the time it was issued, butwas quoted in such a list on 8th June 1989, for the purposes of subparagraph(2)(c) above it shall be deemed to have been quoted in that list at the timeit was issued.

(8B) If a security was issued on or after 9th June 1989, and was quoted in theofficial list of a recognised stock exchange at a time aftet it was issued butbefore the end of the qualifying period, for the purposes of sub-paragraph(2)(c) above it shall be deemed to have been quoted in that list at the timeit was issued; and the qualifying period is the period of one month beginningwith the day on which the security was issued]

(9) For the purposes of sub-paragraph (5) above “redemption” does not include any redemption which may bemade before maturity only at the option of the person who issued the security(and no other person).

(10) In a case where the amount payable on redemption, or the amount ofinterest, is under the terms of issue determined by reference to the movementof the index for a period (a notional period) in place of a later actualperiod (a process commonly known as lagging) the fourth condition shall betreated as fulfilled if the following rules are fulfilled—

(a) under the terms of issue the notional period must start not more thaneight months before the actual period starts and must end not more than eightmonths before the actual period ends, and

(b) where the index is applied for the notional period it must, under theterms of issue, be applied precisely and without restriction.

(11) In a case where the terms of issue contain provision for the amountpayable on redemption to be not less than an amount stated in the terms, theprovision shall not prevent the fourth condition being fulfilled if—

(a) the security was issued before 9th June 1989, and

(b) the amount stated does not constitute a deep gain (within the meaninggiven by paragraph 1(9) above).

[F41 (11A) In a case where the terms of issue contain provision for the amountpayable on redemption to be not less than a specified percentage of the issueprice, the provision shall not prevent the fourth condition being fulfilledif the specified percentage is not greater than 10.]

(12) In a case where—

(a) the terms of issue contain provision for the amount payable on redemptionin any of the qualifying circumstances (set out in sub-paragraph (13) below)to be not less than an amount stated in the terms, and

(b) the security was issued before 9th June 1989,

the provision shall not prevent the fourth condition being fulfilled.

[F42 (12A) In a case where—

(a) the terms of issue contain provision for the amount payable on redemptionin any of the qualifying circumstances (set out in sub-paragraph (13) below)to be not more than the issue price, and

(b) the security was issued on or after 9th June 1989,

the provision shall not prevent the fourth condition being fulfilled.]

(13) For the purposes of sub-paragraphs (7) [F43 , (12) and (12A)] above the following are qualifying circumstances—

(a) there is a fundamental change in the rules governing the index and thechange would be detrimental to the interests of the person who holds thesecurity for the time being;

(b) the index ceases to be published without being replaced by a comparableindex;

[F44 (c) in the case of a security issued before 13th November 1991, any circumstances except circumstances in which the person who holds the security for the time being exercises an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur;

(d) in the case of a security issued on or after 13th November 1991, any circumstances for redemption which may be made before maturity otherwise than at the option of the person who holds the security for the time being and as regards which the conditions set out in paragraph 1(3B) above are fulfilled (judged at the time of the security’s issue and read subject to paragraph 1(3C) and (3D) above);

(e) in the case of a security issued on or after 13th November 1991, any circumstances for redemption which may be made before maturity at the option of the person who holds the security for the time being and as regards which the conditions set out in paragraph 1(3E) above are fulfilled (judged at the time of the security’s issue and read subject to paragraph 1(3F) and (3G) above).]

(14) In a case where an issue is handled by an agent for the person making theissue, or by an underwriter, for the purposes of sub-paragraphs (2) to (5) and(10) above the terms of issue shall be taken to include any terms on which theagent or underwriter offers the security.

(15) For the purposes of this paragraph the amount payable on redemption doesnot include any amount payable by way of interest.

(16) For the purposes of this paragraph “control” (in relation to acompany) shall be construed in accordance with section 840 of the Taxes Act1988.

Textual Amendments

F40 Finance Act 1990 (c. 29), s. 58(2)(7)–deemedalways to have had effect. Previously

“the security was issued before9th June 1989 and was quoted in the official list of a recognised stockexchange on 8th June 1989”

F41 Finance Act 1990 (c. 29), s. 58(3)(4)respectively–deemed always to have had effect (subs. (7))

F42 Finance Act 1990 (c. 29), s. 58(5)(7)–deemedalways to have had effect

F43 Finance Act 1990 (c. 29), s. 58(6)(a)(7)–deemedalways to have had effect. Previously

“and (12)”

F44 Sch. 11 para. 2(13)(c)-(e) substituted(retrospectively and deemed always to have had effect) for sub-para. (13)(c)(d) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras.3, 7, 8

Convertible securities U.K.

3 (1) For the purposes of paragraph 1 above a security is a convertible securityif—

(a) it was issued by a company before 9th June 1989,

(b) under the terms of issue it can be converted into or exchanged for sharecapital in a company (whether or not the company is the one which issued thesecurity), and

(c) the condition set out in sub-paragraph (2) below is fulfilled.

(2) The condition is that—

(a) at some time in the qualifying period the security was quoted in theofficial list of a recognised stock exchange,

(b) at some time in that period relevant share capital was so quoted, or

(c) each of paragraphs (a) and (b) above is satisfied (though not necessarilyas regards the same time).

(3) For the purposes of sub-paragraph (2) above the qualifying period is theperiod of one month beginning with the day on which the security was issued.

(4) For the purposes of sub-paragraph (2) above relevant share capital isshare capital in the company into whose share capital the security can beconverted or for whose share capital the security can be exchanged; andrelevant share capital need not be share capital into or for which thesecurity can be converted or exchanged.

(5) References in this paragraph to share capital are to share capital bywhatever name called.

[F45 Issue price] U.K.

Textual Amendments

F45 Sch. 11 para. 3A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 54, Sch. 12 para.4.

[3A (1) This paragraph applies where—

(a) securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,

(b) on a later occasion securities (new securities) of the same kind are issued,

(c) a sum (the extra return) is payable in respect of each new security, by the person issuing it, to reflect the fact that interest is accruing on the old securities,

(d) the issue price of each new security includes an element (whether or not separately identified) representing payment for the extra return, and

(e) the extra return is equal to the amount of interest payable for the relevant period on each old security.

(2) In such a case, the issue price of each new security shall be deemed for the purposes of paragraph 1(9) above to be its actual issue price less an amount equal to the extra return payable in respect of the security.

(3) For the purposes of this paragraph securities are of the same kind if they are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.

(4) For the purposes of this paragraph the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are issued.

(5) For the purposes of this paragraph the relevant day is—

(a) the last (or only) interest payment day to fall in respect of the old securities before the day on which the new securities are issued, or

(b) the day on which the old securities were issued, in a case where no interest payment day fell in respect of them before the day on which the new securities are issued;

and an interest payment day, in relation to the old securities, is a day on which interest is payable under them.]

Meaning of transfer etc. U.K.

4 (1) This paragraph has effect for the purposes of this Schedule.

(2) “Transfer”, in relation to a security, means transfer by wayof sale, exchange, gift or otherwise.

[F46 (2A) But (notwithstanding sub-paragraph (2) above) “transfer”does not include a transfer made ona conversion of a security into sharecapital in a company.]

(3) Where an agreement for the transfer of a security is made, it istransferred, and the person to whom it is agreed to be transferred becomesentitled to it, when the agreement is made and not on a later transfer madepursuant to the agreement; and “entitled”, “transfer” and cognateexpressions shall be construed accordingly.

(4) A person holds a security at a particular time if he is entitled to it atthe time.

(5) A person acquires a security when he becomes entitled to it; and “acquisition” shall be construed accordingly.

(6) If an agreement is conditional (whether on the exercise of an option orotherwise) for the purposes of sub-paragraph (3) above it is made when thecondition is exercised.

Textual Amendments

F46 Finance Act 1990 (c. 29), s. 56, Sch. 10 para. 27(2),29(1)–deemed always to have had effect

Charge to tax on transfer U.K.

5 (1) This paragraph applies if—

(a) there is a transfer of a deep gain security on or after 14th March 1989(irrespective of when the person making the transfer acquired it), and

(b) the amount obtained on transfer exceeds the amount paid on acquisition.

(2) In such a case—

(a) an amount equal to the difference between those two amounts, less theamount of any costs, shall be treated as income of the person making thetransfer,

(b) the income shall be chargeable to tax under Case III or Case IV (as thecase may be) of Schedule D,

(c) the income shall be treated as arising in the year of assessment in whichthe transfer takes place, and

(d) notwithstanding anything in sections 64 to 67 of the Taxes Act 1988, thetax shall be computed on the income arising in the year of assessment forwhich the computation is made.

(3) For the purposes of this paragraph—

(a) the amount obtained on transfer is the amount obtained, in respect of thetransfer, by the person making it,

(b) the amount paid on acquisition is the amount paid by that person inrespect of his acquisition of the security (or his last acquisition of itbefore the transfer), and

(c) costs are the costs incurred by that person in connection with thetransfer and with his acquisition of the security (or his last acquisition ofit before the transfer).

(4) For the purposes of sub-paragraph (3)(a) above the person making thetransfer shall be treated as obtaining in respect of it—

(a) any amount he actually obtains in respect of it, and

(b) any amount he is entitled to obtain, but does not obtain, in respect ofit.

(5) Sub-paragraph (4) above shall not apply where paragraph 7, 8 or 9 belowapplies.

Redemption U.K.

6 (1) Paragraph 5 above applies where there is a redemption of a deep gainsecurity as well as where there is a transfer.

(2) In its application by virtue of sub-paragraph (1) above, paragraph 5 aboveshall have effect as if—

(a) references to the person making the transfer were to the person who wasentitled to the security immediately before redemption, and

(b) other references to transfer were to redemption.

Death U.K.

7 (1) Where an individual who is entitled to a security dies, for the purposesof this Schedule—

(a) he shall be treated as transferring it to his personal representativesimmediately before his death, and

(b) he shall be treated as obtaining in respect of the transfer an amountequal to the market value of the security at the time of the transfer.

(2) Where a security is transferred by personal representatives to a legatee,for the purposes of paragraph 5 above they shall be treated as obtaining inrespect of the transfer an amount equal to the market value of the securityat the time of the transfer.

(3) In sub-paragraph (2) above “legatee” includes any person taking (whether beneficiallyor as trustee) under a testamentary disposition or on an intestacy or partialintestacy, including any person taking by virtue of an appropriation by thepersonal representatives in or towards satisfaction of a legacy or otherinterest or share in the deceased’s property.

Modifications etc. (not altering text)

C30 Sch. 11 para. 7(1) excluded (27.7.1993 with effect for the year 1992-93 and subsequent years of assessment) by 1993 c. 34, ss. 176(3)(c), 184(3)

Connected persons U.K.

8 (1) This paragraph applies where a security is transferred from one person toanother (whether or not on or after 14th March 1989) and they are connectedwith each other.

(2) For the purposes of paragraph 5 above—

(a) the person making the transfer shall be treated as obtaining in respectof it an amount equal to the market value of the security at the time of thetransfer, and

(b) the person to whom the transfer is made shall be treated as paying inrespect of his acquisition of the security an amount equal to that marketvalue.

(3) Section 839 of the Taxes Act 1988 (connected persons) shall apply for thepurposes of this paragraph.

Market value U.K.

9 (1) This paragraph applies where a security is transferred from one person toanother (whether or not on or after 14th March 1989) and—

(a) the transfer is made for a consideration which consists of or includesconsideration not in money or money’s worth, or

(b) the transfer is made otherwise than by way of a bargain made at arm’slength.

(2) For the purposes of paragraph 5 above—

(a) the person making the transfer shall be treated as obtaining in respectof it an amount equal to the market value of the security at the time of thetransfer, and

(b) the person to whom the transfer is made shall be treated as paying inrespect of his acquisition of the security an amount equal to that marketvalue.

Underwriters U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F49 10

Textual Amendments

F49 Sch. 11 para. 10 repealed (27.7.1993 with effect for the year 1994 and subsequent underwriting years) by 1993 c. 34, s. 213, Sch. 23 Pt. III(12) Note 2

Trustees U.K.

11 (1) Where on a transfer or redemption of a security by trustees an amount istreated as income chargeable to tax by virtue of paragraph 5 above, the rateat which it is chargeable shall be [F50 the rate applicable to trusts] for the year of assessment in which the transfer ismade.

(2) Where the trustees are trustees of a scheme to which section 469 of theTaxes Act 1988 applies, sub-paragraph (1) above shall not apply if or to theextent that the amount is treated as income in the accounts of the scheme.

Textual Amendments

F50 Words in Sch. 11 para. 11(1) 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)

Foreign currency U.K.

12 (1) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount obtained on transfer would be an amount expressed in acurrency other than sterling, it shall be treated for those purposes as thesterling equivalent on the day of the transfer of the amount so expressed.

(2) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount paid on acquisition would be an amount expressed in acurrency other than sterling, it shall be treated for those purposes as thesterling equivalent on the day of the acquisition of the amount so expressed.

(3) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount of the costs incurred by a person in connection with atransfer would be an amount expressed in a currency other than sterling, itshall be treated for those purposes as the sterling equivalent on the day ofthe transfer of the amount so expressed.

(4) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount of the costs incurred by a person in connection with anacquisition would be an amount expressed in a currency other than sterling,it shall be treated for those purposes as the sterling equivalent on the dayof the acquisition of the amount so expressed.

(5) In sub-paragraphs (1) and (3) above “transfer” includes “redemption”.

(6) For the purposes of this paragraph the sterling equivalent of an amounton a particular day is the sterling equivalent calculated by reference to theLondon closing rate of exchange for that day.

Receipts in United Kingdom U.K.

13 (1) Sub-paragraph (2) below applies where—

(a) by virtue of paragraph 5(2) above an amount is treated as income of aperson and as chargeable to tax under Case IV of Schedule D, and

(b) the person satisfies the Board, on a claim in that behalf, that he is notdomiciled in the United Kingdom, or that (being a Commonwealth citizen or acitizen of the Republic of Ireland) he is not ordinarily resident in theUnited Kingdom.

(2) In such a case—

(a) any amounts received in the United Kingdom in respect of the amounttreated as income shall be treated as income arising in the year of assessmentin which they are so received, and

(b) paragraph 5(2) above shall have effect with the substitution of paragraph(a) above for paragraph 5(2)(c).

(3) For the purposes of sub-paragraph (2) above—

(a) there shall be treated as received in the United Kingdom all amounts paid,used or enjoyed in, or in any manner or form transmitted or brought to, theUnited Kingdom, and

(b) subsections (6) to (9) of section 65 of the Taxes Act 1988 shall apply asthey apply for the purposes of subsection (5) of that section.

Retirement benefit schemes U.K.

14 In a case where—

(a) paragraph 5 above would apply (apart from this paragraph) to a transferor redemption of a security, and

(b) immediately before the transfer or redemption was made the security washeld for the purposes of an exempt approved scheme (within the meaning ofChapter I of Part XIV of the Taxes Act 1988),

that paragraph shall not apply to the transfer or redemption.

Charities U.K.

15 (1) In a case where—

(a) paragraph 5 above would apply (apart from this paragraph) to a transferor redemption of a security,

(b) immediately before the transfer or redemption was made the security washeld by a charity, and

(c) the amount which would (apart from this paragraph) be treated as incomeby virtue of paragraph 5 above is applicable and applied for charitablepurposes,

that paragraph shall not apply to the transfer or redemption.

(2) In this paragraph “charity” has the same meaning as in section 506 of the TaxesAct 1988.

Stock lending U.K.

16 In a case where—

(a) a security is the subject of a transfer which falls within section 129(3)of the Taxes Act 1988, and

(b) paragraph 5 above would apply to the transfer (apart from this paragraph),

that paragraph shall not apply to the transfer.

Accrued income scheme U.K.

17 In a case where—

(a) a security is the subject of a transfer to which paragraph 5 aboveapplies, and

(b) apart from this paragraph, the transfer would be a transfer for thepurposes of sections 710 to 728 of the Taxes Act 1988,

the transfer shall not be a transfer for those purposes.

Other provisions excluded U.K.

18 In a case where paragraph 5 above applies to the redemption of a security,sections 123 and 348 to 350 of the Taxes Act 1988 shall not apply to anyproceeds of the redemption.

Identification of securities U.K.

19 Section [F51 108 of the M12 Taxation of Chargeable Gains Act 1992] shall apply to theidentification, for the purposes of this Schedule, of deep gain securitiestransferred or redeemed as it applies to the identification, for the purposesof capital gains tax, of deep discount securities disposed of.

Textual Amendments

F51 Words in Sch. 11 para. 19 substituted (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. 10 para. 19(6)(b) (with ss. 60, 101(1), 201(3))

Marginal Citations

M12 1992 c. 12.

[F52 Early redemption: special rules] U.K.

Textual Amendments

F52 Sch. 11 para 19A and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras4, 7, 8

F53 19A (1) Sub-paragraph (2) below applies where—

(a) a security is issued on or after 13th November 1991,

(b) it would be a deep gain security apart from paragraph 1(3B) or (3E) above,

(c) it is redeemed before maturity, and

(d) immediately before redemption it was held by a person connected with the person who issued it.

(2) As regards the redemption, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) Sub-paragraph (4) below applies where—

(a) the conditions set out in sub-paragraph (1)(a) to (c) above are fulfilled,

(b) the security was transferred in the period ending with redemption and beginning with the day falling one year before the day of redemption, and

(c) the transfer was by a person connected with the person who issued the security.

(4) As regards the transfer, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(5) Section 839 of the Taxes Act 1988 (connected persons) shall apply for the purposes of this paragraph.

Textual Amendments

F53 Sch. 11 para 19A and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras4, 7, 8

Gilts: special rules U.K.

20 (1) In a case where—

(a) securities have been issued under a prospectus under which no securitieswere issued before 14th March 1989,

(b) some of the securities issued under the prospectus are gilt-edgedsecurities which are would-be deep gain securities,

(c) some of the securities issued under the prospectus are gilt-edgedsecurities which are not would-be deep gain securities, and

(d) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities falling within paragraph (c) above (at that time),

sub-paragraph (2) below shall apply in relation to any gilt-edgedsecurity which has been or is issued under the prospectus at any time (whetherbefore, at or after the time mentioned in paragraph (d) above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(d) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above a would-be deep gain securityis a security which would be a deep gain security apart from paragraph 1(6)above.

(4) In sub-paragraph (1) above “gilt-edged security” has the same meaning as in paragraph1 above.

(5) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Non-gilts: special rules U.K.

21 (1) In a case where—

(a) all the securities issued on the occasion of the original issue under aparticular prospectus (whatever the time of the issue) are neither gilt-edgedsecurities nor deep gain securities,

(b) some of the securities issued under the prospectus are not gilt-edgedsecurities but are new would-be deep gain securities, and

(c) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities which (looking at the state of affairs at that time) havebeen issued under the prospectus and are neither gilt-edged securities nor newwould-be deep gain securities,

sub-paragraph (2) below shall apply in relation to any security which isnot a gilt-edged security but which has been or is issued under the prospectusat any time (whether before, at or after the time mentioned in paragraph (c)above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above [F54 , and subject to paragraph 21A below,] a new would-be deep gain security is a security which—

(a) would be a deep gain security apart from paragraph 1(7) above, and

(b) was issued on or after 14th March 1989.

(4) In sub-paragraph (1) above “gilt-edged security” has the same meaning as in paragraph1 above.

(5) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Textual Amendments

F54 Words in Sch. 11 para. 21(3) inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras. 5(1), 7, 8

[F55 21A (1) A security which (apart from this paragraph) would be a new would-be deep gain security for the purposes of paragraph 21(1) above is not such a security if the following three conditions are fulfilled.

(2) The first condition is that all the securities issued on the occasion of the original issue were issued before 13th November 1991.

(3) The second condition is that the security is issued on or after 13th November 1991.

(4) The third condition is that, even if paragraph 1(7) above did not prevent the security being a deep gain security, it would nevertheless not be a deep gain security if for the purposes of paragraph 1(2) above “redemption” did not include any redemption which may be made before maturity otherwise than in pursuance of the exercise by the person who holds the security for the time being of an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur.]

Textual Amendments

F55 Sch. 11 para. 21A inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras. 5(2), 7, 8

Indexed securities: special rules U.K.

22 (1) Sub-paragraph (2) below applies where—

(a) a qualifying indexed security has been issued,

(b) the person by whom it was issued and the person for the time being holdingit make an agreement, on or after 14th March 1989, varying the terms underwhich it is held, and

(c) the terms as varied are such that, had the security been issued on thoseterms, it would be a deep gain security.

(2) As regards any event occurring in relation to the security after theagreement is made, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

(4) In this paragraph “qualifying indexed security” has the meaning given byparagraph 2 above.

[F56 Convertible securities: special rules (1)] U.K.

Textual Amendments

F56 Finance Act 1990 (c. 29), s. 56, Sch. 10 paras. 27(3), 29(4)on and after 9 June 1989

22A (1) Sub-paragraph (2) below applies where—

(a) a security is a qualifying convertible security, for the purposes ofSchedule 10 to the Finance Act 1990, at the time of its issue,

(b) apart from paragraph 21 of Schedule 4 to the Taxes Act 1988, it would bea deep discount security at that time, and

(c) at a later time it ceases to be a qualifying convertible security for thepurposes of Schedule 10 to the Finance Act 1990.

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Convertible securities: special rules (2) U.K.

22B (1) In a case where—

(a) a security is a qualifying convertible security, for the purposes ofSchedule 10 to the Finance Act 1990, at the time of its issue, and

(b) apart from this sub-paragraph it would be a deep gain security at thattime,

then (subject to sub-paragraph(3) below) the security shall be treated,at the time of its issue and at all subsequent times, as not being a deep gainsecurity.

(2) Sub-paragraph (3) below applies where—

(a) sub-paragraph (1) above applies in the case of a security, and

(b) at a time after its issue it ceases to be a qualifying convertiblesecurity for the purposes of Schedule 10 to the Finance Act 1990.

(3) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (2)(b) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(4) For the purposes of sub-paragraph (3)above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

[F57 No particular redemption date: special rule] U.K.

Textual Amendments

F57 Sch. 11 para 22C and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras6, 7, 8

F58 22C (1) This paragraph applies to a security whose terms contain no particular date by which it is to be redeemed.

(2) In the case of such a security the following expressions, wherever they appear in this Schedule, shall be construed as if the words “before maturity” were omitted—

(a) the expression “redemption which may be made before maturity”;

(b) the expression “redemption before maturity”;

(c) the expression “redeemed before maturity”.

Textual Amendments

F58 Sch. 11 para 22C and cross heading inserted (retrospectively and deemed always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s. 33, Sch. 7 paras6, 7, 8

Power to modify U.K.

23 (1) The Treasury may make regulations amending paragraph 2 above so as to doone or more of the following—

(a) vary any condition for the time being set out in that paragraph;

(b) omit any condition for the time being so set out;

(c) add a new condition to any for the time being so set out;

(d) substitute a condition or conditions for any condition or conditions forthe time being so set out.

(2) Regulations under sub-paragraph (1) above—

(a) shall be made by statutory instrument subject to annulment in pursuanceof a resolution of the House of Commons,

(b) shall apply where there is a transfer within the meaning of this Schedule,or a redemption, on or after such day as may be specified in the regulations,and

(c) may include such supplementary, incidental, consequential or transitionalprovisions as appear to the Treasury to be necessary or expedient.

Modifications etc. (not altering text)

C33 Sch. 11 modified (27.7.1993) by 1993 c. 34, ss. 65(2)(4)(7)(8), 66(1)

Sch. 11 applied (27.7.1993) by 1993 c. 34, ss. 164(12), (with s. 165)

Section 107.

SCHEDULE 12 U.K. Close Companies

Part I U.K. Administrative Provisions

Interpretation U.K.

1 In this Part of this Schedule “the relevant provisions”means—

(a) sections 13A, 231 and 419 to 422 of the Taxes Act 1988, and

(b) Chapter III of Part XI of that Act (as it has effect in relation toaccounting periods beginning before 1st April 1989).

Provision of information by company U.K.

2 U.K. The inspector may, by notice, require any company which is, or appears tohim to be, a close company to furnish him within such time (not being lessthan 30 days) as may be specified in the notice with such particulars as hethinks necessary for the purposes of the relevant provisions.

Provision of information by shareholders U.K.

3 (1) If for the purposes of the relevant provisions any person in whose nameany shares are registered is so required by notice by the inspector, he shallstate whether or not he is the beneficial owner of the shares and, if not thebeneficial owner of the shares, shall furnish the name and address of theperson or persons on whose behalf the shares are registered in his name. U.K.

(2) This paragraph shall apply in relation to loan capital as it applies inrelation to shares.

Information about bearer securities U.K.

4 (1) The inspector may, for the purposes of the relevant provisions, by noticerequire— U.K.

(a) any company which appears to him to be a close company to furnish him withparticulars of any bearer securities issued by the company, and the names andaddresses of the persons to whom the securities were issued and the respectiveamounts issued to each person, and

(b) any person to whom bearer securities were issued by the company, or to orthrough whom such securities were subsequently sold or transferred, to furnishhim with such further information as he may require with a view to enablinghim to ascertain the names and addresses of the persons beneficiallyinterested in the securities.

(2) In this paragraph—

• “loan creditor” has the same meaning as in Part XI of theTaxes Act 1988, and

• “securities” includes shares, stock, bonds, debentures anddebenture stock and also any promissory note or other instrument evidencingindebtedness to a loan creditor of the company.

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.

F59 6 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F59 Sch. 12 para. 6 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)

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.

Section 121.

SCHEDULE 13 U.K. Capital Allowances: Miscellaneous Amendments

1–26 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F60

Textual Amendments

F60 Sch. 13 paras. 1–26, 28–30 repealed by Capital Allowance Act 1990 (c. 1), s. 164(4)(5), Sch. 2

Patent rights U.K.

27 (1) Section 521 of the Taxes Act 1988 shall be amended as follows.

(2) In subsection (5) (which limits allowable expenditure in the case ofcertain sales entered into between connected persons or for the purpose ofobtaining an allowance)—

(a) the words “within the terms of section 839” shall be omitted, and

(b) for the words “the disposal value” onwards there shall be substitutedthe words “the relevant amount determined in accordance with subsection (6)below”.

(3) After subsection (5) there shall be added—

“(6) The relevant amount referred to in subsection (5) above is—

(a) in a case in which, by virtue of subsections (2) to (4) above, a disposalvalue falls to be brought into account by reason of the sale, an amount equalto that disposal value,

(b) in a case in which no disposal value falls to be brought into account asmentioned in paragraph (a) above, but the seller receives on the sale acapital sum in respect of which he is chargeable to tax in accordance withsection 524, an amount equal to that sum,

(c) in any other case, an amount equal to whichever of the following is thesmallest—

(i) the price which the rights would have fetched if sold in the open market,

(ii) where capital expenditure was incurred by the seller on acquiring therights, the amount of that expenditure,

(iii) where capital expenditure was incurred by any person connected with theseller on acquiring the rights, the amount of the expenditure incurred by thatperson.

(7) Section 839 (connected persons) shall apply for the purposes of thissection.”

(4) This paragraph shall have effect in relation to expenditure incurred onor after the day on which this Act is passed.

28–30 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F61

Textual Amendments

F61 Sch. 13 paras. 1–26, 28–30 repealed by Capital Allowance Act 1990 (c. 1), s. 164(4)(5), Sch. 2

F62 SCHEDULE 14 U.K.

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

Textual Amendments

F62 Sch. 14 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 s. 201(3), Sch. 11 paras. 22, 26(2), 27)

F69 SCHEDULE 15 U.K.

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

Textual Amendments

F69 Sch. 15 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 s. 201(3), Sch. 11 paras. 22, 26(2), 27)

Section 181.

[F75 SCHEDULE 16 U.K. Broadcasting: Additional Payments by Programme Contractors

Textual Amendments

F75 S. 181, Sch. 16 repealed (prosp. as mentioned in S.I. 1990/2347, art. 3(3)) by Broadcasting Act 1990 (c. 42, SIF 96), ss. 127-129, 134, 203(3), 204(2), Schs. 9-12, Sch. 21

Part I U.K. Amendments of the Principal Sections

1 (1) Section 32 of the M13 Broadcasting Act 1981 (rentalpayments by programme contractors) shall be amended as follows. U.K.

(2) In subsection (1)(b), after the word “amounts” there shall beinserted the words “in respect of profits and in respect of advertisingrevenue”.

(3) In subsection (2)(b), after the word “amounts” there shall beinserted the words “in respect of profits”.

(4) In subsection (4), for the word “Table”, where it first occurs, thereshall be substituted the word “Tables” and the following Tables shall besubstituted for the Table in that subsection—

“TABLE A

RATES OF ADDITIONAL PAYMENTS IN RESPECT OF ADVERTISING REVENUE

	Rate for determining amount of additional payments
For so much of the advertising revenue for the accounting period as does not exceed the free slice for advertising revenue.	Nil
For so much of the advertising revenue for the accounting period as exceedsthe free slice for advertising revenue.	The relevant revenue rate except where the rate is nil

For the purposes of this Table—

(a) a nil rate, instead of the relevant revenue rate, is applicable in thecase of persons who are DBS programme contractors or DBS teletext contractors;

(b) the relevant revenue rate is 10 per cent; and

(c) the free slice for advertising revenue is £15 million or, in thecase of a TV programme contractor, that amount with the addition of thepayments payable by him in pursuance of section 13(2).

TABLE B

RATES OF ADDITIONAL PAYMENTS IN RESPECT OF PROFITS

For so much of the profits for the accounting period after deducting anyamount payable under Table A as does not exceed the free slice for profits.	Nil
For so much of the profits for the accounting period after deducting anyamount payable under Table A as exceeds the free slice for profits.	The relevant profits rate except where the rate is nil.

For the purposes of this Table—

(a) a nil rate, instead of the relevant profits rate, is applicable in thecase of—

(i) programme contractors who provide local sound broadcasts, and

(ii) DBS programme contractors or DBS teletext contractors;

(b) the relevant profits rate is 25 per cent; and

(c) the free slice for profits is £2 million.”

(5) Subsection (4A) shall be omitted.

(6) In subsection (5), for the words “relevant sum mentioned in subsection(4A)” there shall be substituted the words “relevant sum mentioned in theTables above”.

(7) In subsection (7), after the words “additional payments” there shallbe inserted the words “in respect of profits”.

(8) In subsection (8), for the words “any of the provisions of subsections(4), (4A)” there shall be substituted the words “any of the provisionsof subsections (4)”.

(9) For subsection (9) there shall be substituted the followingsubsections—

“(9) The power of the Secretary of State under subsection (8) shall includepower to amend the provisions in question as there mentioned—

(a) only in their application in relation to the additional payments mentionedin subsection (1)(b); or

(b) only in their application in relation to the additional payments mentionedin subsection (2)(b); or

(c) differently in their application as mentioned in paragraphs (a) and (b)respectively; or

(d) only in their application in relation to additional payments in respectof advertising revenue; or

(e) only in their application in relation to additional payments in respectof profits; or

(f) differently in their application as mentioned in paragraphs (d) and (e)respectively.

(9A) In the application of the provisions mentioned in subsection (8) inrelation to the additional payments mentioned in subsection (1)(b), the powerof the Secretary of State under subsection (8) shall also include power toamend those provisions as mentioned in subsection (8)—

(a) only in relation to persons who are TV programme contractors (includingpersons who are both TV programme contractors and teletext contractors); or

(b) only in relation to persons who are DBS programme contractors (includingpersons who are both DBS programme contractors and teletext contractors); or

(c) only in relation to persons who are teletext contractors (other than DBSteletext contractors) but are not TV or DBS programme contractors; or

(d) only in relation to persons who are DBS teletext contractors but are notTV or DBS programme contractors; or

(e) differently in relation to persons within paragraphs (a), (b), (c) and (d)respectively.”

Marginal Citations

M13 1981 c. 68.

2 (1) Section 33 of the M14 Broadcasting Act 1981 (supplementalprovisions) shall be amended as follows. U.K.

(2) In subsection (1), for the words “advertising receipts” there shallbe substituted the words “advertising revenue”.

(3) In subsection (2), for the words “advertising receipts” there shallbe substituted the words “advertising revenue” and for the words “thosereceipts derive” there shall be substituted the words “the revenuederives”.

(4) In subsection (3)(c), for the words “advertising receipts” thereshall be substituted the words “advertising revenue” and for the word “derive” there shall be substituted the word “derives”.

Marginal Citations

M14 1981 c. 68.

3 (1) Section 34 of the Broadcasting Act 1981 (instalments payable on accountby programme contractors for their accounting periods) shall be amended asfollows. U.K.

(2) In subsection (3)(c), for the words “receipts are” there shall besubstituted the words “revenue is”.

4 (1) Section 35 of the M15 Broadcasting Act 1981 (provision forsupplementing additional payments) shall be amended as follows. U.K.

(2) In subsection (1)—

(a) in paragraph (a), after the words “additional payments” there shallbe inserted the words “in respect of profits”;

(b) in paragraph (b)(ii), the words “in the case of second categoryprofits,” shall be omitted; and

(c) at the end, there shall be added the words “in respect of profits of hisfor that period”.

Marginal Citations

M15 1981 c. 68.

Part II U.K. Provisions Inserted as Schedule 4 to the Broadcasting Act 1981

“Schedule 4 U.K. Rental Payments

Advertising revenue U.K.

1 (1) The advertising revenue of a programme contractor for an accounting periodshall be computed in accordance with this paragraph.

(2) Advertising revenue shall consist of the payments received or to bereceived by the programme contractor in consideration of the insertion ofadvertisements in programmes provided by the programme contractor andbroadcast in the United Kingdom by the Authority.

(3) In the application of this Schedule in relation to the additional paymentsmentioned in section 32(1)(b), the advertising revenue of a programmecontractor other than a teletext contractor who is not a TV programmecontractor includes payments received or to be received by him inconsideration of the insertion of programmes consisting of advertisementsprovided by him for broadcasting on the Fourth Channel and so broadcast.

(4) If, in connection with the insertion of advertisements which are paid forby payments constituting advertising revenue, any payments are made to theprogramme contractor to meet any additional payments, those payments shall beregarded as made in consideration of the insertion of the advertisements inquestion.

(5) In the case of an advertisement inserted in a programme under arrangementsmade between a programme contractor and a person acting as advertising agent,the amount of any receipt by the programme contractor which represents apayment by the advertiser from which the advertising agent has deducted anyamount by way of commission shall, except in a case falling withinsub-paragraph (6), be the amount of the payment by the advertiser after thededuction of the commission.

(6) If the amount deducted by way of commission as mentioned in sub-paragraph(5) exceeds 15 per cent. of the payment by the advertiser, the amount of thereceipt shall be the amount of that payment less 15 per cent.

(7) Any contract shall provide that where for any insertion of anadvertisement a programme contractor receives or is entitled to an entireconsideration not solely referable to that insertion, the advertising revenueshall be calculated by reference to so much only of the consideration as isreferable to that insertion according to an apportionment made in such manneras the contract may provide.

Profits U.K.

2 (1) The profits of a programme contractor for an accounting period shall becomputed in accordance with this paragraph.

(2) The profits shall consist of the excess of relevant income over relevantexpenditure.

(3) “Relevant income” means—

(a) in relation to a programme contractor other than a DBS programmecontractor or a DBS teletext contractor, income which accrues to thecontractor in connection (directly or indirectly) with—

(i) the provision by the contractor of programmes for broadcasting on ITV, theFourth Channel or a local sound broadcasting service, or

(ii) the provision by the contractor, for broadcasting, distribution or showingin the United Kingdom, of programmes provided by him for broadcasting on ITV,the Fourth Channel or a local sound broadcasting service;

(b) in relation to a DBS programme contractor or DBS teletext contractor,income which accrues to the contractor in connection (directly or indirectly)with—

(i) the provision by the contractor to the Authority, in accordance with theterms of his contract as a DBS programme contractor or (as the case may be)DBS teletext contractor, of programmes for broadcasting in the Authority’s DBSservice to which his contract with the Authority relates, or

(ii) the provision by the contractor, for broadcasting, distribution or showingin the United Kingdom, of programmes broadcast in the Authority’s DBS service.

(4) Without prejudice to the generality of sub-paragraph (3), “relevant income” includes—

(a) all revenue which is advertising revenue for the purposes of thisparagraph; and

(b) such part of any income which—

(i) accrues to any subsidiary of or company related to the programmecontractor or to the contractor’s holding company, and

(ii) would be relevant income of that contractor if he and the subsidiary orrelated company or his holding company were a single programme contractor,

as, in the opinion of the Authority, should be attributed to thecontractor as reflecting his financial interest in the subsidiary or therespective financial interests of the holding company in the contractor andthe company related to the contractor or the financial interest of the holdingcompany in the contractor, as the case may be.

(5) For the purposes of this paragraph advertising revenue includes—

(a) in relation to a DBS programme contractor, payments received or to bereceived by him in respect of charges made for the reception of programmesprovided by him and broadcast in a DBS service;

(b) in relation to a teletext contractor, payments received or to be receivedby him in respect of charges made for the reception of programmes provided byhim and broadcast in a DBS or additional teletext service.

(6) “Relevant expenditure” means any expenditure of the programmecontractor which is properly chargeable to revenue account and which isincurred in connection with the provision by him of programmes of a kindmentioned in sub-paragraph (3).

(7) Without prejudice to the generality of sub-paragraph (6), “relevant expenditure” includes—

(a) expenditure in connection with the sale of rights to insert advertisementsin programmes; and

(b) such part of any expenditure which—

(i) is incurred by any subsidiary of or company related to the programmecontractor or by the contractor’s holding company, and

(ii) would be relevant expenditure of that contractor if he and the subsidiaryor related company or his holding company were a single programme contractor,

as, in the opinion of the Authority, should be attributed to thecontractor as reflecting his financial interest in the subsidiary or therespective financial interests of the holding company in the contractor andthe company related to the contractor or the financial interest of the holdingcompany in the contractor, as the case may be;

(c) in the case of a DBS programme contractor or a teletext contractor, anyexpenditure incurred in connection with the collection of charges for thereception of programmes provided by him and broadcast in a DBS service or ina DBS or additional teletext service, as the case may be; and

(d) in the case of a DBS programme or DBS teletext contractor, any expenditureincurred in connection with the provision of the satellite transponder.

(8) In ascertaining relevant income or relevant expenditure no account shallbe taken of interest on any loan.

(9) Items of relevant income and items of relevant expenditure shall beattributed to accounting periods in accordance with the foregoing provisionsof this Schedule.

(10) In this paragraph “programme” means—

(a) in the application of this Schedule in relation to the additional paymentsmentioned in section 32(1)(b), a television programme; and

(b) in the application of this Schedule in relation to the additional paymentsmentioned in section 32(2)(b), a local sound broadcast.

Carry forward of losses U.K.

3 (1) Where, in any accounting period, the relevant expenditure of a programmecontractor exceeds his relevant income, the excess shall be carried forwardto the following accounting period and treated as relevant expenditure forthat period for the purpose of computing his profits for that period.

(2) When a programme contractor’s contract with the Authority comes to an end,no losses incurred at any time during the currency of that contract may becarried forward under this paragraph and set against income attributable toany subsequent contract between him and the Authority.

Computation of profits of programme contractors U.K.

4 (1) It shall be the duty of the Authority—

(a) to draw up, and from time to time review, a statement setting out theprinciples to be followed in ascertaining, for any accounting period, aprogramme contractor’s—

(i) advertising revenue, and

(ii) relevant income and relevant expenditure for the purpose of computing hisprofits;

(b) in computing the advertising revenue and the profits of a programmecontractor for any accounting period, to take account of that statement(including any revision thereof which has taken effect before the end of thatperiod).

(2) A statement under this paragraph may set out different principles for TVprogramme contractors, DBS programme contractors, programme contractors forthe provision of local sound broadcasting and teletext contractors.

(3) Before drawing up or revising a statement under this paragraph theAuthority shall consult the Secretary of State and the Treasury.

(4) The Authority shall—

(a) publish the statement drawn up under this paragraph and every revision ofthat statement; and

(b) transmit a copy of the statement, and of every revision of it, to theSecretary of State;

and the Secretary of State shall lay copies of the statement and of everysuch revision before each House of Parliament.

(5) The principles relating to advertising revenue and to profits may be setout in separate statements under this paragraph; and where this is done itsprovisions apply to each statement.

Disputes U.K.

5 (1) For the purposes of the principal sections and this Schedule—

(a) the amount of any advertising revenue, or

(b) the amount of any profits, or

(c) the amount of any additional payments, or of an instalment of additionalpayments,

shall, in the event of a disagreement between the Authority and theprogramme contractor, be the amount determined by the Authority.

(2) No determination of the Authority under this paragraph shall be called inquestion in any court of law, or be the subject of any arbitration; butnothing in this sub-paragraph shall prevent the bringing of proceedings forjudicial review.

Accounting periods U.K.

6 (1) Subject to the provisions of this Schedule, each period for which a bodycorporate which is a programme contractor makes up a profit and loss accountwhich is laid before the body corporate in general meeting shall be anaccounting period, whether that period is a year or not.

(2) If part of the said period for which a profit and loss account is made upfalls before, and part after—

(a) the commencement of a relevant order under section 32, or

(b) the time when the programme contractor begins or ceases to provideprogrammes for broadcasting by the Authority,

the two parts shall be treated as separate accounting periods.

In paragraph (a) “relevant order” means, in theapplication of this Schedule in relation to the additional payments mentionedin subsection (1)(b) or (as the case may be) subsection (2)(b) of section 32,an order having effect in relation to those payments.

(3) Where two parts of such a period as is mentioned in sub-paragraph (1) fallto be divided from each other under sub-paragraph (2)(a), section 32(4) shallhave effect as if the profits and advertising revenue for each part were theprofits and advertising revenue for the whole multiplied by—

where X and Y are respectively the number of weeks in that part and thenumber of weeks in the other part, counting (in each case) an odd four daysor more as a week.

(4) If sub-paragraph (2)(b) would produce an accounting period of three monthsor less, that period shall be added on to the accounting period (if any) whichprecedes or succeeds it (and which does not fall to be divided from it undersub-paragraph (2)(b)).

(5) A contract which varies another contract may modify the precedingprovisions of this paragraph.

(6) Nothing in this paragraph shall create an accounting period during whichthe programme contractor is not providing programmes for broadcasting by theAuthority.

7 If a programme contractor is not a body corporate the contractor’saccounting periods shall be such as the Authority may direct, or as may beprovided in the contract.

Information U.K.

8 (1) Every contract shall impose on the contractor such requirements withrespect to the furnishing of information to the Authority as appear to theAuthority, after consultation with the Secretary of State, to berequisite—

(a) for enabling the Authority to perform their functions under the provisionsof the principal sections and this Schedule, and

(b) for enabling the Authority to furnish to the Secretary of State suchinformation as he may require for the purpose of determining whether, and inwhat manner, to exercise his powers of making orders under the saidprovisions.

(2) Without prejudice to the generality of sub-paragraph (1), the duty imposedon the Authority by that sub-paragraph includes the duty to impose, so far asis reasonably practicable, such requirements as will enable the Authority todetermine the amounts (if any) which, in relation to any programme contractor,are to be treated as advertising revenue and relevant income and relevantexpenditure for the computation of profits by virtue, respectively, ofparagraphs 1 and 2.

(3) It shall be the duty of the Authority to furnish to the Secretary of Statesuch information (whether obtained from contractors or otherwise) as is intheir possession and is required by the Secretary of State for the purpose ofdetermining whether, and in what manner, to exercise his powers of makingorders under the said provisions.

9 It shall be the duty of the Authority in framing any contract to includeterms ensuring that the Authority will have the right to inspect accounts andrecords—

(a) of the programme contractor, and

(b) of any subsidiary of the programme contractor,

for the purpose of discharging their functions under the principalsections and this Schedule.

Interpretation U.K.

10 (1) In this Schedule, and in the principal sections, except where the contextotherwise requires—

• “accounting period” shall be construed in accordance withparagraph 6;

• “additional payments” and “contract”—

(a) in the application of this Schedule and the principal sections in relationto the additional payments mentioned in section 32(1)(b), mean respectivelyadditional payments payable by virtue of that paragraph and a contract betweenthe Authority and a programme contractor under which television programmes areto be provided by the programme contractor, and

(b) in their application in relation to the additional payments mentioned insection 32(2)(b), mean respectively additional payments payable by virtue ofthat paragraph and a contract between the Authority and a programme contractorunder which local sound broadcasts are to be provided by the programmecontractor;

• “related”, in relation to a company and a programmecontractor, means that another person (whether alone or jointly with one ormore persons and whether directly or indirectly) holds, or is beneficiallyentitled to, 50 per cent or more of the equity share capital, or possesses 50per cent or more of the voting power, in the company and in the programmecontractor and “holding company” means that other person; and

• “subsidiary”, in relation to any person, means a company inwhich that person (whether alone or jointly with one or more persons andwhether directly or indirectly) holds, or is beneficially entitled to, 10 percent or more of the equity share capital, or possesses 10 per cent or more ofthe voting power.

(2) In this Schedule “payment” includes any valuableconsideration, and references to revenue and receipts and expenditure shallbe construed accordingly.”

Part III U.K. Transitional Provisions

1 (1) In this paragraph— U.K.

• “new statutory provisions” means the provisions of the M16 Broadcasting Act 1981 as amended by this Act; and

• “existing statutory provisions” means the provisions of thatAct as they had effect immediately before the coming into force of section181.

(2) Any contract between the Authority and a programme contractor which is inforce immediately before the day on which section 181 of this Act comes intoforce shall, until it is varied or superseded by a further contract betweenthem or expires or is otherwise terminated (whichever first occurs), be deemedto be modified by virtue of this Schedule so as—

(a) to substitute provisions in conformity with the new statutory provisionsfor so much of the contract as is in accordance with the existing statutoryprovisions and is not in conformity with the new statutory provisions, and

(b) to incorporate in the contract such additional provisions as a contractbetween the Authority and a programme contractor is required to include inaccordance with the new statutory provisions;

and (subject to paragraph 5 of Schedule 4 to the 1981 Act) any provisionsof the contract which provide for arbitration as to any matters contained inthe contract in accordance with the existing statutory provisions shall beconstrued as making the like provision for arbitration in relation to mattersdeemed to be included in the contract by virtue of this sub-paragraph.

(3) Where it appears to the Authority that the new statutory provisions callfor the inclusion of additional terms in any such contract, but do not affordsufficient particulars of what those terms should be, the Authority may, afterconsulting the programme contractor, decide what those terms are to be.

(4) This paragraph shall not be taken to have effect in relation to anycontract entered into by a programme contractor and any person other than theAuthority before the day on which section 181 of this Act comes into force.

Marginal Citations

M16 1981 c. 68.

2 U.K. Where any accounting period of a programme contractor begins before 1stJanuary 1990 and ends after 31st December 1989, the additional paymentspayable by the programme contractor in relation to that accounting periodunder section 32 of the M17 Broadcasting Act 1981 shall be theaggregate of—

(a) the amounts payable by him on the assumption that section 181 of this Actwas not in force at any time during the accounting period, multipliedby—

and

(b) the amounts payable by him on the assumption that that section was inforce throughout the accounting period, multiplied by—

where (taking any odd four days or more as a week)—

• X is the number of weeks in the accounting period falling before 1stJanuary 1990, and

• Y is the number of weeks in the accounting period falling after 31stDecember 1989.

Marginal Citations

M17 1981 c. 68.

3 U.K. Where, under the existing statutory provisions, any excess of firstcategory expenditure over first category income of a programme contractorwould have been carried forward and treated as relevant first categoryexpenditure of his for an accounting period ending after 31st December 1989if those provisions had applied in relation to that period then the excessshall be carried forward and treated, under the new statutory provisions, asrelevant expenditure of the contractor for any accounting period which endsafter that date.

4 U.K. In this Part of this Schedule, references to programme contractors shallbe read as including references to teletext contractors.]

Section 187.

SCHEDULE 17 U.K. Repeals

Part I U.K. Customs and Excise

1979 c. 2.	The Customs and Excise Management Act 1979.	Section 17(5)(a).Section 147(1).
1979 c. 4.	The Alcoholic Liquor Duties Act 1979.	Section 73.
1988 c. 39.	The Finance Act 1988.	Section 11(2).

The repeals of section 147(1) of the Customs and Excise Management Act1979 and section 11(2) of the Finance Act 1988 have effect in relation tooffences committed on or after the day on which this Act is passed.

Part II U.K. Vehicles Excise Duty

1971 c. 10.	The Vehicles (Excise) Act 1971.	In Part I of Schedule 3, paragraph 5A, and in paragraph 8(2)(d) the words “any load other than”.In Part I of Schedule 4, paragraphs 12 and 13,andin paragraph 15(1) the definitions of “agricultural machine”, “fisherman’s tractor”, “mobile crane”, “recovery vehicle” and “works truck” and the word “and” preceding the last of thosedefinitions.
1971 c. 68.	The Finance Act 1971.	Section 6(1).
1972 c. 10 (N.I.).	The Vehicles (Excise) Act (Northern Ireland) 1972.	In Part I of Schedule 3, paragraph 5A, and in paragraph 8(2)(d) the words “any load other than”.In Part I of Schedule 4, paragraphs 12 and 13,andin paragraph15(1) the definitions of “agricultural machine”, “fisherman’stractor”, “mobile crane”, “recovery vehicle” and “workstruck” and the word “and” preceding the last of those definitions.
1976 c. 40.	The Finance Act 1976.	Section 14.
1982 c. 39.	The Finance Act 1982.	In Schedule 5, paragraph 16(6).
1987 c. 16.	The Finance Act 1987.	In Part II of Schedule 1, paragraph 4.
1988 c. 39.	The Finance Act 1988.	Section 4(3)(a).In Part II of Schedule 2, paragraph 3.

1 The repeals in paragraph 8 of Part I of Schedule 3 to the Vehicles(Excise) Act 1971 and paragraph 8 of Part I of Schedule 3 to the Vehicles(Excise) Act (Northern Ireland) 1972 come into force on the day on which thisAct is passed.

2 The remaining repeals have effect in relation to licences taken out after14th March 1989.

Part III U.K. Value Added Tax

1983 c. 55.	The Value Added Tax Act 1983.	In Schedule 5, Group 6 and, in Group 8A, Note (5).
1984 c. 43.	The Finance Act 1984.	In Schedule 6, Part II.
S.I. 1986/704.	The Value Added Tax (Land) Order 1986.	The whole Order.
S.I. 1986/716.	The Value Added Tax (Land) (No.2) Order 1986.	The whole Order.
S.I. 1987 /1072.	The Value Added Tax (Construction of Buildings) (No.2) Order 1987.	Article 2.

1 U.K. The repeal of Group 6 of Schedule 5 to the Value Added Tax Act 1983 haseffect in relation to supplies made on or after 1st April 1989.

2 U.K. The remaining repeals have effect in accordance with Schedule 3 to thisAct.

Part IV U.K. Income and Corporation Tax: General

1970 c. 9.	The Taxes Management Act 1970.	In section 15(11), paragraph (b) and the word “and” preceding it.
1988 c. 1.	The Income and Corporation Taxes Act 1988.	In section 131(2), the words “for the same or another chargeableperiod”.In section 149(1), the words “for that period” and the words “for that or any other period”. Section 170.Section 175(3).In section 176(1), the words “(but not morethan six months)”.In section 178(2), paragraph (b) and the word “or”preceding it.Section 203(4).In section 231, in subsection (4) the words “andwhere” onwards, and subsection (5).Section 433.Section 434(4) and(5).Section 435.Section 436(3)(b).Section 507(2).In section 590(3)(d), thewords “(disregarding any excess of that remuneration over the permittedmaximum)”.Section 595(2) and (3).In section 596(3)(a), the word “either” and the words “or subsection (2)”.In section 600(1), thewords “or have been” and the words “or has at any time been”.Section635(4).In section 645, in subsection (3), the word “and” followingparagraph (a) and subsection (5).In section 655(5), the words “in caseswhere the applications are made before 1st February 1990”.Section 769(7)(b)and (c).In section 824(10), the definition of “United Kingdom estate”.InSchedule 8, in paragraph 7(1), the words “, or is an associate of a personwho has,”; in paragraph 13, in sub-paragraph (1) the word “fixed” andsub-paragraphs (2) and (3); and, in paragraph 14, sub-paragraph (2), insub-paragraph (5) the words “specified in, or” and sub-paragraph (7).InSchedule 9, in paragraph 10, paragraph (ii) of sub-paragraph (c) and the word “and” preceding it.In Schedule 23, paragraph 8.
1988 c. 39.	The Finance Act 1988.	In section 68(1), the words from “at the fixed price” to “tendered”.

1 U.K. The repeals in sections 131 and 149 and of section 170 of the Income andCorporation Taxes Act 1988 have effect in accordance with section 42 of thisAct.

2 U.K. The repeals in sections 231 and 824 of the Income and Corporation TaxesAct 1988 have effect in accordance with sections 110 and 111 of this Act.

3 U.K. The repeals in sections 433 to 435 of the Income and Corporation Taxes Act1988 have effect in accordance with section 84(5) of this Act and the repealof section 436(3)(b) of that Act has effect in accordance with section 87(5)of this Act.

4 U.K. The repeals in sections 590, 595, 596 and 600 of, and in Schedule 23 to,the Income and Corporation Taxes Act 1988 have effect in accordance withSchedule 6 to this Act.

5 U.K. The repeals in sections 635, 645 and 655 of the Income and CorporationTaxes Act 1988 have effect in accordance with Schedule 7 to this Act.

6 U.K. The repeal of section 769(7)(b) and (c) of the Income and CorporationTaxes Act 1988 has effect in accordance with section 100 of this Act.

7 U.K. The repeal in the Finance Act 1988 has effect in relation to offers madeon or after 11th October 1988.

Part V U.K. Close Companies

Modifications etc. (not altering text)

C31 Sch. 17 Pt. V restricted (retrospectively) by 1993 c. 34, s. 79(2)(a)

1970 c. 9.	The Taxes Management Act 1970.	Section 29(2).In section 31(3)(b), the words “426,”.In the Table insection 98, in the first column, the reference to paragraph 17 of Schedule 19to the principal Act.In Schedule 3, in rule 8, the words from “orrelating” to “Schedule 19 to the principal Act”.
1972 c. 41.	The Finance Act 1972.	In Schedule 24, paragraph 6.
1979 c. 14.	The Capital Gains Tax Act 1979.	In section 89(1), paragraph (b) and the word “or” preceding it.
1988 c. 1.	The Income and Corporation Taxes Act 1988.	In section 127(3), paragraph (b) and the word “or” preceding it.Insection 230, the word “either”, the words from “or to” to “Schedule 19” and the words “in either case”.In section 239(7), thewords “subsections (5) to (7) of section 430 and”.In section 249(3), thewords “and paragraph 12(1) to (3) of Schedule 19”.In section 250(7), thewords “and paragraph 12 of Schedule 19”.Section 414(3).In section 416(1),the words from “except” to “Schedule 19”.Sections 423 to 430.Insection 539(1), the words “including tax under section 426”.In section681, in subsection (1), paragraph (b) and the word “and” preceding it andsubsections (2) and (3).Section 686(3) and (4).Section 687(3)(b) and (c).Insection 701(8), the words “426(3)”.Section 742(9)(d) and (10).In section825(1)(a), the words from “and any” to “430(7)(a)”.In Schedule 4,paragraph 10(3).In Schedule 8, in paragraph 7(3), the second “and”.Schedule 19.In Schedule 29, in the Table in paragraph 32, theentries relating to section 29(2) of the Taxes Management Act 1970 andsections 89(1)(b) and 136(10)(b) of the Capital Gains Tax Act 1979.
1988 c. 39.	The Finance Act 1988.	Section 102(2)(a).

1 U.K. The repeal in section 98 of the Taxes Management Act 1970 and the repealof paragraph 17 of Schedule 19 to the Income and Corporation Taxes Act 1988have effect on and after the day on which this Act is passed.

2 U.K. The repeal in section 89 of the Capital Gains Tax Act 1979 (and thecorresponding repeal in Schedule 29 to the Income and Corporation Taxes Act1988) have effect where the due date of issue of the share capital issued toa close company falls in an accounting period of the company beginning after31st March 1989.

3 U.K. The repeal of section 414(3) of the Income and Corporation Taxes Act 1988has effect from 1st April 1989.

4 U.K. The repeal of sections 423 to 430 of, and Schedule 19 to, the Income andCorporation Taxes Act 1988 has effect in accordance with section 103 of thisAct.

5 U.K. The repeals in section 681 of the Income and Corporation Taxes Act 1988have effect in relation to the income of bodies corporate for accountingperiods beginning after 31st March 1989.

6 U.K. The remaining repeals have effect in relation to accounting periodsbeginning after 31st March 1989.

Part VI U.K. Capital Allowances

1968 c. 3.	The Capital Allowances Act 1968.	Section 9(b).Section 14.Section 50.Section 67(11).In section 68, insubsections (1) and (3), the words “or forestry”, in each place wherethey occur, and in subsection (2), the words “and forestryincome”.Section 80.In section 87(4), the words “or forestry”, in bothplaces where they occur.In section 92(5), the words “allowed or” and thewords “balancing allowance or”.Section 93(1) and (2).Schedule 8.
1971 c. 68.	The Finance Act 1971.	In Schedule 8, paragraph 2 and, in paragraph 7, in sub-paragraph (1) thewords “Subject to sub-paragraph (2) below” and the words from “byreason of” to the end of paragraph (b) and sub-paragraph (2).
1978 c. 42.	The Finance Act 1978.	In Schedule 6, paragraph 8.
1980 c. 48.	The Finance Act 1980.	In section 74(6), the words from the beginning to “and”.In section75(6), the words from the beginning to “and”.
1982 c. 39.	The Finance Act 1982.	In Schedule 12, paragraph 11.
1986 c. 41.	The Finance Act 1986.	Section 56(5).In Schedule 15, in paragraphs 1 to 3, the words “orforestry”, in each place where they occur, in paragraph 7(3), the words “subject to paragraph 9 below”, and in paragraph 11, the words “andforestry income” and the words “or forestry income”.
1988 c. 1.	The Income and Corporation Taxes Act 1988.	In section 521(5), the words “within the terms of section 839”.

1 U.K. The repeal in paragraph 7(1)(b) of Schedule 8 to the Finance Act 1971 haseffect in cases where machinery or plant is brought into use on or after theday on which this Act is passed.

2 U.K. The repeals in sections 68 and 87(4) of the Capital Allowances Act 1968and in paragraphs 1 to 3 and 11 of Schedule 15 to the Finance Act 1986 haveeffect in relation to chargeable periods beginning on or after 6th April 1993.

3 U.K. The repeal in section 521(5) of the Income and Corporation Taxes Act 1988has effect in accordance with paragraph 27 of Schedule 13 to this Act.

4 U.K. The repeals of the provisions listed in sub-paragraph (5) of paragraph 28of Schedule 13 to this Act have effect in accordance with that paragraph.

Part VII U.K. Capital Gains

1973 c. 51.	The Finance Act 1973.	In section 38(3B)(a), the words “within the period of two years endingat the date of the disposal”.
1979 c. 14.	The Capital Gains Tax Act 1979.	Section 126(7)(b).Section 142A(5)(c).In Schedule 4, in paragraph 1(2), thewords “at the rate of 50 per cent.,”, in paragraph 3(1), the words from “by virtue” to “(settled property)”, in paragraph 3(2), the words “at the rate of 50 per cent.,” and in paragraph 4(4), the words “(taking account” onwards.
1980 c. 48.	The Finance Act 1980.	Section 79.
1981 c. 35.	The Finance Act 1981.	Section 78.Section 96(3)(e) and (4).
1982 c. 39.	The Finance Act 1982.	Sections 81 and 82.
1984 c. 43.	The Finance Act 1984.	Section 64(2)(a).
1984 c. 51.	The Inheritance Tax Act 1984.	In section 97(2), the words from “and in this section” to the end.
1985 c. 54.	The Finance Act 1985.	In section 70(10), paragraph (a) and the word “and” following it.
1986 c. 41.	The Finance Act 1986.	In section 58(2), paragraph (b) and the word “and” precedingit.Section 101(2).
1987 c. 51.	The Finance (No.2) Act 1987.	Section 78.
1988 c. 1.	The Income and Corporation Taxes Act 1988.	In Schedule 29, in the Table in paragraph 32, the entry relating to section126(7) of the Capital Gains Tax Act 1979.

1 U.K. The repeal in the Finance Act 1973 has effect in accordance with section130 of this Act.

2 U.K. The repeal in section 142A of the Capital Gains Tax Act 1979 has effectin accordance with section 92 of this Act.

3 U.K. The repeal of section 81 of the Finance Act 1982 has effect in relationto disposals on or after 6th April 1989 or, in the case of section 81(1)(b),assets acquired on or after that date.

4 U.K. The repeal of section 64(2)(a) of the Finance Act 1984 has effect inaccordance with section 139(1) of this Act.

5 U.K. The repeal in section 97(2) of the Inheritance Tax Act 1984 has effect inaccordance with section 138(7) of this Act.

6 U.K. The repeal in the Finance (No.2) Act 1987 has effect in accordance withsection 140 of this Act.

7 U.K. The remaining repeals have effect in relation to disposals on or after14th March 1989 (except that they shall not have effect in relation to sucha disposal in a case where the enactment in question operates in consequenceof relief having been given under section 79 of the Finance Act 1980 inrespect of a disposal made before that date).

Part VIII U.K. Management

1970 c. 9.	The Taxes Management Act 1970.	Section 16(6).In section 20, subsections (4) and (5) and, in subsection(6), the words “and in relation” onwards.In section 20B(7), the wordsfrom “to a person” to “daughter”.Sections 37 to 39.In section 40(2),the words “Subject to section 41 below,”.Section 41.In section 53(1), thewords “and the reference” onwards.In section 61(5), the words “withinthe said five days” and the words from “The costs” to “thecollector, and”.Section 62(3), so far as unrepealed.Section 64(3), so faras unrepealed.Section 70(5).Section 86(6).Section 87(4) and (5).In section 98,in the Table, in column 1, in the entry relating to Part III of the TaxesManagement Act 1970, the words “, except sections 16 and 24(2)” and theentry relating to section 481(5)(k) of the Income and Corporation Taxes Act1988.In section 118(1), the definition of “neglect”.
1973 c. 51.	The Finance Act 1973.	In Schedule 16A, paragraph 10.
1975 c. 45.	The Finance (No.2) Act 1975.	In section 47(1), the words “of not less than £25”.
1976 c. 24.	The Development Land Tax Act 1976.	In Schedule 8, paragraphs 17 and 18, so far as unrepealed.
1980 c. 48.	The Finance Act 1980.	Section 62.
1982 c. 39.	The Finance Act 1982.	Section 69.
1987 c. 51.	The Finance (No.2) Act 1987.	In section 84, subsections (1) to (3) and (5) to (8).
1988 c. 1.	The Income and Corporation Taxes Act 1988.	In section 824, in subsections (1)(a) and (b), the words “of not lessthan £25” and, in subsection (5), the words “of not less than£25” and paragraph (b) and the word “and” preceding it.Insection 825(2), the words “of not less than £100”.In Schedule 19A,paragraph 10.
1988 c. 39.	The Finance Act 1988.	In section 126, subsection (1) and, in subsection (4)(b), the words “and(9)”.
		In Schedule 3, paragraph 29.
1989 c. 26.	The Finance Act 1989.	Section 165(2).

1 U.K. The repeals in sections 16, 53 and 98 of the Taxes Management Act 1970have effect in accordance with section 164 of this Act.

2 U.K. The repeals in sections 20 and 20B of the Taxes Management Act 1970 andsection 126 of the Finance Act 1988 have effect with respect to notices given,or warrants issued, on or after the day on which this Act is passed.

3 U.K. The repeals of sections 37 to 39, in section 40, of section 41 and insection 118 of the Taxes Management Act 1970 and in Schedule 3 to the FinanceAct 1988 have effect in accordance with section 149 of this Act.

4 U.K. The repeals in section 61 of the Taxes Management Act 1970 come into forceon the day appointed under section 152(7) of this Act.

5 U.K. The repeals in sections 86 and 87 of the Taxes Management Act 1970, theFinance (No.2) Act 1975, the Finance Act 1980 and sections 824 and 825 of theIncome and Corporation Taxes Act 1988 have effect in accordance with section158 of this Act.

6 U.K. The repeal in the Finance Act 1982 has effect in accordance with section156(4) of this Act.

7 U.K. The repeal of subsection (2) of section 165 of this Act has effect inrelation to failures beginning on or after the day appointed under thatsubsection.

Part IX U.K. Stamp Duty: Insurance

54 & 55 Vict. c. 39.	The Stamp Act 1891.	Section 91.Section 98(1).Section 100.Section 118.In Schedule 1, paragraph(3) of the heading beginning “Bond, Covenant, or Instrument of any kindwhatsoever”, the whole of the heading beginning “Insurance”, and thewhole of the heading beginning “Policy of Life Insurance”.
4 & 5 Eliz. 2 c. 54.	The Finance Act 1956.	Section 38.
4 & 5 Eliz. 2 c. 11 (N.I.).	The Finance Act (Northern Ireland) 1956.	Section 6.
7 & 8 Eliz. 2 c. 58.	The Finance Act 1959.	In section 30(4), the words preceding paragraph (a) and the words followingparagraph (c).
7 & 8 Eliz. 2 c. 9 (N.I.).	The Finance Act (Northern Ireland) 1959.	In section 5(4), the words preceding paragraph (a) and the words followingparagraph (c).
1966 c. 18.	The Finance Act 1966.	Section 47.
1966 c. 21 (N.I.).	The Finance Act (Northern Ireland) 1966.	Section 5.
1970 c. 24.	The Finance Act 1970.	In Schedule 7, paragraphs 7(4) and 17.
1970 c. 21 (N.I.).	The Finance Act (Northern Ireland) 1970.	In Schedule 2, paragraphs 7(4) and 17.
1982 c. 39.	The Finance Act 1982.	Section 130.
1988 c. 1.	The Income and Corporation Taxes Act 1988.	In Schedule 14, in paragraph 3(4) the words from “and section 100” tothe end.

These repeals have effect in accordance with section 173 of this Act.

Part X U.K. Rates of Interest

1970 c. 9.	The Taxes Management Act 1970.	Section 89.
1970 c. 24.	The Finance Act 1970.	Section 30.
1970 c. 21 (N.I.).	The Finance Act (Northern Ireland) 1970.	Section 1(1) and (2).
1973 c. 51.	The Finance Act 1973.	In Schedule 16A, in paragraph 3(4), para-graph (a) and the word “and”following it and the words “they apply”.
1975 c. 22.	The Oil Taxation Act 1975.	In Schedule 2, in the Table in paragraph 1, the entry relating to section89 of the Taxes Management Act 1970.
1975 c. 45.	The Finance (No.2) Act 1975.	Section 47(2).
1980 c. 1.	The Petroleum Revenue Tax Act 1980.	Section 2(3).
1984 c. 51.	The Inheritance Tax Act 1984.	Section 233(2) and (4).
1986 c. 41.	The Finance Act 1986.	Section 92(4) and (5).In Schedule 19, paragraph 32.
1987 c. 51.	The Finance (No.2) Act 1987.	Section 89.
1988 c. 1.	The Income and Corporation Taxes Act 1988.	In section 824, subsection (1A), in subsection (2) the words “and(1A)” and in subsection (6) the words “Without prejudice to subsection(1A) above”.In section 825, subsection (2A) and in subsection (5) the words “Without prejudice to subsection (2A) above”.In Schedule 19A, inparagraph 3(4), para-graph (a) and the word “and” following it and thewords “they apply”.
1988 c. 39.	The Finance Act 1988.	In Schedule 13, paragraphs 7(b) and (f) and 8.

These repeals have effect in accordance with section 178(7) of this Act.

Part XI U.K. Broadcasting

1981 c. 68.	The Broadcasting Act 1981.	Section 32(4A).In section 35(1)(b)(ii), the words “in the case of secondcategory profits,”.
1982 c. 39.	The Finance Act 1982.	In section 144, subsections (1), (2), (4) and (5).
1984 c. 46.	The Cable and Broadcasting Act 1984.	Section 40(2).In Schedule 5, in paragraph 40, sub-paragraphs (7), (8) and(9).
1986 c. 41.	The Finance Act 1986.	In Schedule 22, paragraph 1, and paragraphs 4 to 8.

These repeals have effect on 1st January 1990.

Part XII U.K. Government Stock: Redemption

11 and 12 Geo. 5 c. 32.	The Finance Act 1921.	Sections 50 and 51.Schedule 3.
5 and 6 Geo. 6 c. 21.	The Finance Act 1942.	In Schedule 11, in Part II, the amendments of the Finance Act 1921.
9 and 10 Geo. 6 c. 64.	The Finance Act 1946.	Section 66.
1969 c. 48.	The Post Office Act 1969.	Section 108(1)(c).
1982 c. 41.	The Stock Transfer Act 1982.	Section 4.

So far as relating to stock registered in the National Savings StockRegister these repeals have effect on the coming into force of the firstregulations made by virtue of section 3(1)(bb) of the National Debt Act 1972and so far as relating to other stock and bonds they have effect on the cominginto force of the first regulations made by virtue of section 47(1)(bb) of theFinance Act 1942.

Part XIII U.K. National Savings

1971 c. 29.	The National Savings Bank Act 1971.	Section 5(2), (5), (6) and (7).In section 26(2), paragraph (b) and the word “or” preceding it.
1982 c. 39.	The Finance Act 1982.	In Schedule 20, paragraph 4(2).

These repeals, apart from the repeal of section 5(2), (5) and (6) of theNational Savings Bank Act 1971, come into force on 1st October 1989.

Part XIV U.K. Tithe Redemption

26 Geo. 5 & 1 Edw. 8 c. 43.	The Tithe Act 1936.	Section 2(1).In section 4(2), in paragraph (a) the words “the amount”onwards.Section 7.Part II.Section 31(7).In section 47(1), the definition of “interest date”.In section 47(4), the words “of any stock, or”.InSchedule 7, paragraph 3(a) of Part I, Part II, and paragraph 2 of Part III.
5 & 6 Geo. 6 c. 21.	The Finance Act 1942.	In Schedule 11, in Part I the entry relating to Redemption Stock and inPart II the amendment of the Tithe Act 1936.
14 & 15 Geo. 6 c. 62.	The Tithe Act 1951.	In section 8(2), the words from “which” to “Act”, and the words “and appended” onwards.
6 & 7 Eliz. 2 c. 55.	The Local Government Act 1958.	In Schedule 8, paragraph 15.
1968 c. 13.	The National Loans Act 1968.	In section 16(7), the words “Part II of the Tithe Act 1936”.Section16(9)(a).In section 22(3), the words “Part II of the Tithe Act 1936”.InSchedule 1, the entries relating to section 26 of the Tithe Act 1936.
1972 c. 65.	The National Debt Act 1972.	In section 15(1), the words “section 24 of the Tithe Act 1936”.
1979 c. 14.	The Capital Gains Tax Act 1979.	In Schedule 2, in Part II, the entry relating to securities issued underPart II of the Tithe Act 1936.

These repeals have effect from the day appointed under section 187(2)of this Act.