Finance Act 1984

SCHEDULES

Section 1.

SCHEDULE 1 Wine and Made-Wine

Description of wine or made-wine	Rates of duty per hectolitre
	£
Wine or made-wine of a strength of less than 15 per cent. and not being sparkling	90.50
Sparkling wine or sparkling made-wine of a strength of less than 15 per cent	149.40
Wine or made-wine of a strength of not less than 15 per cent. but not exceeding 18 per cent	157.50
Wine or made-wine of a strength exceeding 18 per cent. but not exceeding 22 per cent	183.30
Wine or made-wine of a strength exceeding 22 per cent	183.30 plus
	£15.48 for every 1 per cent. or part of 1 per cent. in excess of 22 per cent.

Interpretation

1 (1) Subject to sub-paragraph (3) below, for the purposes of this Act, wine or made-wine which is for the time being in a closed container is sparkling if, due to the presence of carbon dioxide or any other gas, the pressure in the container, measured at a temperature of 20° C, is not less than 1 bar in excess of atmospheric pressure.

(2) For the purposes of this Act, wine or made-wine which is not for the time being in a closed container is sparkling if it has characteristics similar to those of wine or made-wine which has been removed from a closed container and which, before removal, fell within sub-paragraph (1) above.

(3) Notwithstanding anything in sub-paragraph (1) above, wine or made-wine which is for the time being in a closed container shall not be regarded as sparkling for the purposes of the rates of duty set out above, if—

(a) the container does not have a mushroom-shaped stopper (whether solid or hollow) held in place by a tie or fastening ; and

(b) the pressure in the container, measured at a temperature of 20° C, is less than 3 bars in excess of atmospheric pressure.

2 For the purposes of this Act, wine or made-wine shall be regarded as having been rendered sparkling if—

(a) as a result of aeration, fermentation or any other process, it either falls within paragraph 1(1) above or takes on such characteristics as are referred to in paragraph 1(2) above; or

(b) being sparkling wine or made-wine which, by virtue only of paragraph 1(3) above, was not chargeable to duty as sparkling wine or made-wine, it is transferred into a closed container which has a mushroom-shaped stopper (whether solid or hollow) held in place by a tie or fastening.

Section 4.

SCHEDULE 2 VEHICLES EXCISE DUTY

PART I Provisions substituted in Part II of Schedules 1 to 5 to the [1971 c. 10.] Vehicles (Excise) Act 1971 and the [1972 c. 10 (N.I.).] Vehicles (Excise) Act (Northern Ireland) 1972

1 The following are the provisions substituted in the Act of 1971 and the Act of 1972 for Part II of Schedule 1—

Description of vehicle	Rate of duty
	£
1. Bicycles and tricycles of which the cylinder capacity of the engine does not exceed 150 cubic centimetres ......	9.00
2. Bicycles of which the cylinder capacity of the engine exceeds 150 cubic centimetres but does not exceed 250 cubic centimetres; tricycles (other than those in the foregoing paragraph) and vehicles (other than mowing machines) with more than three wheels, being tricycles and vehicles neither constructed nor adapted for use nor used for the carriage of a driver or passenger............	18.00
3. Bicycles and tricycles not in the foregoing paragraphs	36.00

2 The following are the provisions substituted in the Act of 1971 and the Act of 1972 for Part II of Schedule 2—

Description of vehicle	Rate of duty
	£
Hackney carriages	45.00
	with an additional 90p for each person above 20 (excluding the driver) for which the vehicle has seating capacity.

3 The following are the provisions substituted in the Act of 1971 and the Act of 1972 for Part II of Schedule 3—

Weight unladen of vehicle		Rate of duty
1.	2.	3.	4.	5.
Description of vehicle	Exceeding	Not exceeding	Initial	Additional for each ton or part of a ton in excess of the weight in column 2
			£	£
1. Agricultural machines; digging machines; mobile cranes; works trucks; mowing machines; fishermen's tractors.	—	—	15.00	—
2. Haulage vehicles, being showmen's vehicles.	—	7 1/4 tons	144.00	—
	7 1/4 tons	8 tons	172.00	—
	8 tons	10 tons	203.00	—
	10 tons	—	203.00	31.00
3. Haulage vehicles, not being showmen's vehicles.	—	2 tons	171.00
	2 tons	4 tons	308.00	—
	4 tons	6 tons	445.00	—
	6 tons	7 1/4 tons	581.00	—
	7 1/4 tons	8 tons	710.00	—
	8 tons	9 tons	831.00	—
	9 tons	10 tons	951.00	—
	10 tons	11 tons	1,088.00	—
	11 tons	—	1,088.00	136.00

4 The following are the provisions substituted in the Act of 1971 and the Act of 1972 for Part II of Schedule 4—

TABLE A

RATES OF DUTY ON RIGID GOODS VEHICLES EXCEEDING 12 TONNES PLATED GROSS WEIGHT

GENERAL RATES

Plated gross weight of vehicle		Rate of duty
1.	2.	3.	4.	5.
Exceeding	Not exceeding	Two axle vehicle	Three axle vehicle	Four or more axle vehicle
tonnes	tonnes	£	£	£
12	13	410	320	320
13	14	530	340	340
14	15	640	340	340
15	17	850	340	340
17	19	—	460	340
19	21	—	610	340
21	23	—	780	490
23	25	—	1,250	690
25	27	—	—	930
27	29	—	—	1,200
29	30.49	—	—	2,100

TABLE A(1)

RATES OF DUTY ON RIGID GOODS VEHICLES EXCEEDING 12 TONNES PLATED GROSS WEIGHT

RATES FOR FARMERS' GOODS VEHICLES

Plated gross weight of vehicle		Rate of duty
1.	2.	3.	4.	5.
Exceeding	Not exceeding	Two axle vehicle	Three axle vehicle	Four or more axle vehicle
tonnes	tonnes	£	£	£
12	13	140	125	125
13	14	150	125	125
14	15	155	125	125
15	17	195	135	125
17	19	—	145	125
19	21	—	160	135
21	23	—	170	145
23	25	—	230	160
25	27	—	—	190
27	29	—	—	225
29	30.49	—	—	360

TABLE A(2)

RATES OF DUTY ON RIGID GOODS VEHICLES EXCEEDING 12 TONNES PLATED GROSS WEIGHT

RATES FOR SHOWMEN'S GOODS VEHICLES

Plated gross weight of vehicle		Rate of duty
1.	2.	3.	4.	5.
Exceeding	Not exceeding	Two axle vehicle	Three axle vehicle	Four or more axle vehicle
tonnes	tonnes	£	£	£
12	13	140	125	125
13	14	150	125	125
14	15	155	125	125
15	17	195	135	125
17	19	—	145	130
19	21	—	170	145
21	23	—	185	170
23	25	—	270	190
25	27	—	—	230
27	29	—	—	280
29	30.49	—	—	455

TABLE B

SUPPLEMENTARY RATES OF DUTY ON RIGID GOODS VEHICLES OVER 12 TONNES USED FOR DRAWING TRAILERS EXCEEDING 4 TONNES PLATED GROSS WEIGHT

GENERAL RATES

Gross weight of trailer		Duty supplement
Exceeding	Not exceeding
tonnes	tonnes	£
4	8	75
8	10	95
10	12	120
12	14	170
14	—	330

TABLE B(1)

SUPPLEMENTARY RATES OF DUTY ON RIGID GOODS VEHICLES OVER 12 TONNES USED FOR DRAWING TRAILERS EXCEEDING 4 TONNES PLATED GROSS WEIGHT

RATES FOR FARMERS' GOODS VEHICLES

Gross weight of trailer		Duty supplement
Exceeding	Not exceeding
tonnes	tonnes	£
4	8	75
8	10	95
10	12	120
12	14	170
14	—	330

TABLE B(2)

SUPPLEMENTARY RATES OF DUTY ON RIGID GOODS VEHICLES OVER 12 TONNES USED FOR DRAWING TRAILERS EXCEEDING 4 TONNES PLATED GROSS WEIGHT

RATES FOR SHOWMEN'S GOODS VEHICLES

Gross weight of trailer		Duty supplement
Exceeding	Not exceeding
		tonnes
—	—	75

TABLE C

RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING ONLY 2 AXLES

GENERAL RATES

Plated train weight of tractor unit		Rate of duty
1.	2.	3.	4.	5.
Exceeding	Not exceeding	For a tractor unit to be used with semi-trailers with any number of axles	For a tractor unit to be used only with semi-trailers with not less than two axles	For a tractor unit to be used only with semi-trailers with not less than three axles
tonnes	tonnes	£	£	£
12	14	470	420	420
14	16	590	440	440
16	18	690	440	440
18	20	810	440	440
20	22	940	550	440
22	23	1,000	620	440
23	25	1,150	780	440
25	26	1,150	870	530
26	28	1,150	1,090	720
28	29	1,210	1,210	820
29	31	1,680	1,680	1,050
31	33	2.450	2,450	1,680
33	34	2,450	2,450	2,250
34	36	2,750	2,750	2,750
36	38	3,100	3,100	3,100

TABLE C(1)

RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING ONLY 2 AXLES

RATES FOR FARMERS' GOODS VEHICLES

Plated train weight of tractor unit		Rate of duty
1.	2.	3.	4.	5.
Exceeding	Not exceeding	For a tractor unit to be used with semi-trailers with any number of axles	For a tractor unit to be used only with semi-trailers with not less than two axles	For a tractor unit to be used only with semi-trailers with not less than three axles
tonnes	tonnes	£	£	£
12	14	145	140	140
14	16	160	140	140
16	18	170	140	140
18	20	175	140	140
20	22	185	145	140
22	23	190	155	140
23	25	210	165	145
25	26	210	170	155
26	28	210	190	175
28	29	210	205	185
29	31	280	280	220
31	33	395	395	320
33	34	750	750	750
34	36	905	905	905
36	38	1,020	1,020	1,020

TABLE C(2)

RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING ONLY 2 AXLES

RATES FOR SHOWMEN'S GOODS VEHICLES

Plated train weight of tractor unit		Rate of duty
1.	2.	3.	4.	5.
Exceeding	Not exceeding	For a tractor unit to be used with semi-trailers with any number of axles	For a tractor unit to be used only with semi-trailers with not less than two axles	For a tractor unit to be used only with semi-trailers with not less than three axles
tonnes	tonnes	£	£	£
12	14	145	140	140
14	16	160	140	140
16	18	170	140	140
18	20	180	155	155
20	22	205	165	165
22	23	220	170	170
23	25	250	190	175
25	26	250	205	185
26	28	250	240	215
28	29	260	260	230
29	31	355	355	275
31	33	495	495	405
33	34	925	925	925
34	36	1,125	1,125	1,125
36	38	1,265	1,265	1,265

TABLE D

RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING 3 OR MORE AXLES

GENERAL RATES

Plated train weight of tractor unit		Rate of duty
1.	2.	3.	4.	5.
Exceeding	Not exceeding	For a tractor unit to be used with semi-trailers with any number of axles	For a tractor unit to be used only with semi-trailers with not less than two axles	For a tractor unit to be used only with semi-trailers with not less than three axles
tonnes	tonnes	£	£	£
12	14	420	420	420
54	20	440	440	440
20	22	550	440	440
22	23	620	440	440
23	25	780	440	440
25	26	870	440	440
26	28	1,090	440	440
28	29	1,210	520	440
29	31	1.680	640	440
31	33	2,450	970	440
33	34	2,450	1,420	550
34	36	2,450	2,030	830
36	38	2,730	2,730	1,240

TABLE D(1)

RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING 3 OR MORE AXLES

RATES FOR FARMERS' GOODS VEHICLES

Plated train weight of tractor unit		Rate of duty
1.	2.	3.	4.	5.
Exceeding	Not exceeding	For a tractor unit to be used with semi-trailers with any number of axles	For a tractor unit to be used only with semi-trailers with not less than two axles	For a tractor unit to be used only with semi-trailers with not less than three axles
tonnes	tonnes	£	£	£
12	20	140	140	140
20	22	145	140	140
22	23	150	140	140
23	25	165	140	140
25	26	170	145	140
26	23	190	170	155
28	29	205	180	165
29	31	280	215	195
31	33	395	315	230
33	34	470	470	285
34	36	670	670	430
36	38	900	900	650

TABLE D(2)

RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING 3 OR MORE AXLES

RATES FOR SHOWMEN'S GOODS VEHICLES

Plated train weight of tractor unit		Rate of duty
1.	2.	3.	4.	5.
Exceeding	Not exceeding	For a tractor unit to be used with semi-trailers with any number of axles	For a tractor unit to be used only with semi-trailers with not less than two axles	For a tractor unit to be used only with semi-trailers with not less than three axles
tonnes	tonnes	£	£	£
12	18	140	140	140
18	20	145	145	140
20	22	165	160	140
22	23	170	165	140
23	25	190	170	155
25	26	205	180	165
26	28	240	210	180
28	29	260	225	200
29	31	355	270	240
31	33	495	395	290
33	34	580	580	355
34	36	830	830	540
36	38	1,115	1,115	805

5 The following are the provisions substituted in the Act of 1971 and the Act of 1972 for Part II of Schedule 5—

Description of vehicle	Rate of duty
	£
1. Any vehicle first registered under the Roads Act 1920 before 1st January 1947, or which, if its first registration for taxation purposes had been effected in Northern Ireland, would have been so first registered under the Act as in force in Northern Ireland	60.00
2. Other vehicles	90.00

PART II Amendment of Part I of Schedule 4 to the [1971 c. 10.] Vehicles (Excise) Act 1971 and the [1972 c. 10 (N.I.).] Vehicles (Excise) Act (Northern Ireland) 1972

AMENDMENTS MADE IN BOTH ACTS

6 (1) Part I of Schedule 4 to the Act of 1971 and the Act of 1972 (annual rates of duty on goods vehicles: general provisions) shall be amended as follows.

(2) In paragraph 1(1), for " £150" there shall be substituted " £130 ".

(3) In paragraph 2, for " £320 " there shall be substituted " £290 ".

(4) In paragraph 6(1), for " £63 " there shall be substituted " £67 ".

(5) In paragraph 7, for " £85 " there shall be substituted " £90 ".

Section 7.

SCHEDULE 3 GAMING MACHINE LICENCE DUTY

PART I Special Licences and Staggered Starting Dates for Whole-Year Licences in Respect of Premises

1 The [1981 c. 63.] Betting and Gaming Duties Act 1981 shall be amended as follows.

2 For section 21 there shall be substituted—

“21 Gaming machine licences.

(1) Except in the cases specified in Part I of Schedule 4 to this Act, no gaming machine (other than a two-penny machine) shall be provided for gaming on any premises situated in Great Britain unless there is for the time being in force—

(a) a licence granted under this Part of this Act with respect to the premises ; or

(b) a licence so granted with respect to the machine.

(2) A licence of either kind granted under this Part of this Act shall be known as a gaming machine licence; and in this Part " ordinary licence " means a licence falling within subsection (1)(a) above and " special licence" means one falling within subsection (1)(b).

(3) A special licence may be a whole-year or half-year licence and an ordinary licence may be a whole-year, half-year or quarter-year licence ; and the period for which a gaming machine licence is to be granted shall be determined by reference to the following Table.

TABLE

Type of licence	Period for which licence is to be granted
1. Whole-year special licence ...	Twelve months beginning with 1st October.
2. Half-year special licence ...	Six months beginning with 1st April or 1st October.
3. Whole-year ordinary licence in respect of premises situated in—
(a) The first region	Twelve months beginning with 1st December.
(b) The second region	Twelve months beginning with 1st February.
(c) The third region	Twelve months beginning with 1st June.
(d) The fourth region	Twelve months beginning with 1st August.
4. Half-year ordinary licence ...	Six months beginning with 1st April or 1st October.
5. Quarter-year ordinary licence	Three months beginning with 1st January, 1st April, 1st July or 1st October.

In this Table any reference to a named region is a reference to that part of Great Britain which has been designated by the Commissioners, for the purposes of this Act, as that named region.

(4) For the purposes of this Part of this Act, any premises which consist of a means of transport shall be treated as being situated in the fourth region except in any case where the Commissioners direct that they are to be treated as being situated in another named region.”.

3 After section 21 there shall be inserted the following section—

“21A Special licences.

(1) No special licence shall authorise more than one machine.

(2) An application for a special licence shall only be granted if—

(a) the Commissioners are satisfied that at least nine other special licences will be granted to the applicant, for the period to which that application relates, on applications made together with that application ; or

(b) at least ten special licences, granted for that period and for the time being in force, are held by the applicant.

(3) A special licence shall be taken not to be in force with respect to a gaming machine at any time when either that machine is provided for gaming on premises which are not at that time treated by section 22 below as having local authority approval under the Gaming Acts or the licence is not displayed in such manner as may be prescribed by regulations made by the Commissioners.”.

4 In section 22(1), for paragraphs (a) and (b) there shall be substituted—

“(a) in the case of an ordinary licence—

(i) to whether the premises in respect of which the licence is granted have or have not local authority approval under the Gaming Acts ; and

(ii) to the number of machines which, it authorises; and

(b) in any case, to whether the licence authorises the provision of machines chargeable at the lower or higher rate.”.

5 In section 23(1)(a), after the word " apply " there shall be inserted " to special licences and shall apply to ordinary licences ".

6 In section 24—

(a) subsection (1) shall cease to have effect;

(b) in subsection (2), for the words "gaming machine" there shall be substituted " whole-year ordinary licence, one half-year ordinary licence and one quarter-year " and after the word "one", in the second and fourth place, there shall be inserted " of each such ";

(c) in subsection (3), after the word "licence" there shall be inserted " or licences " and at the end there shall be added " ; but any gaming machine with respect to which there is in force a special licence shall be disregarded for the purposes of this subsection. ";

(d) in subsection (4), there shall be added at the end " or there are special licences in force with respect to those machines ";

(e) in subsections (5) and (6), in each case after the words " contravention of " there shall be inserted " section 21(1) above or "; and

(f) in subsection (6)(a)(ii), for the words "gaming machine" there shall be substituted " ordinary ".

7 (1) Part II of Schedule 4 shall be amended as follows.

(2) In paragraphs 6 and 8(2), the words " in respect of any premises " shall, in each case, be omitted.

(3) For sub-paragraph (3) of paragraph 7 there shall be substituted—

“(3) A gaming machine licence shall expire at the end of the period for which it is granted.”.

(4) In paragraph 8(1), for the words from " transfer" to the end there shall be substituted—

“(a) transfer an ordinary licence to respect of any premises to a successor in title to the interest in those premises of the person to whom the licence was granted ; and

(b) where—

(i) a person holding special licences so requests; and

(ii) the proper officer is satisfied that it is appropriate to do so and will not result in any person holding any number of special licences less than ten,

transfer such number of special licences to such other person, as may be specified in the request”.

(5) In paragraph 9—

(a) for the words " a gaming machine " there shall be substituted " an ordinary " ;

(b) in paragraph (a), after the word "licence" there shall be inserted " or, in the case of a whole-year licence, substituting premises in a different named region (within the meaning of section 21(3) of this Act) "; and

(c) in paragraph (b), for the word "licence", where it first occurs, there shall be substituted " ordinary licence for the same period " and for the word "the", where it last occurs, there shall be substituted " any such ".

(6) In paragraph 10, in sub-paragraph (1), for the words "a gaining machine" there shall be substituted " an ordinary " and in sub-paragraph (3) the words from "except" to the end shall be omitted.

(7) For sub-paragraphs (1) and (2) of paragraph 11 there shall be substituted the following sub-paragraphs—

“(1) Where the holder of a gaming machine licence surrenders it to the proper officer at a time when the licence has at least three months to run, he shall, subject to any provision made by regulations under paragraph 11A below, be entitled to a repayment of duty equal to the appropriate fraction of the duty paid on the grant of the licence, the appropriate fraction being—

(a) in the case of a half-year licence, 5/11ths;

(b) in the case of a whole-year licence surrendered not more than three months after the date on which the period for which it was granted began, 7/10ths;

(c) in the case of a whole-year licence surrendered more than three, but not more than six, months after that date, 9/20ths; and

(d) in the case of a whole-year licence surrendered more than six months after that date, 3/20ths.

(2) A special licence shall not be surrendered unless the Commissioners are satisfied that, if it is surrendered, its holder will (having regard to any other licences surrendered at the same time) hold at least ten, or cease to hold any, special licences.”.

(8) In sub-paragraph (3) of paragraph 11 for the words "Sub-paragraph (2)" there shall be substituted " Sub-paragraph (1) " and for the words " that section " there shall be substituted the words " section 21(1) or 24 of this Act ".

(9) After paragraph 11 there shall be inserted—

“Reduction of duty in certain cases

11A (1) For the purpose of giving credit, on the taking out of a gaming machine licence in certain circumstances where duty has been paid on one or more previous licences, the Commissioners may make regulations providing that, in prescribed cases, the amount of duty payable on a gaming machine licence shall, subject to prescribed conditions, be reduced by a prescribed amount.

(2) Regulations under this paragraph may make provision modifying, or excluding, the application of paragraph 11 above in cases in which duty is reduced in accordance with the regulations.”.

(10) In paragraph 12, for the words " a gaming machine " there shall be substituted " , an ordinary ".

(11) In paragraph 13, for the words from " gaming machines provided " to " in force " there shall be substituted—

“(a) gaming machines provided on any premises in respect of which an ordinary licence is in force ; and

(b) gaming machines in respect of which special licences are in force”.

(12) In paragraph 17(1), for the words " section 24 " there shall be substituted " section 21(1) or 24 ".

(13) In paragraph 18, for the words from "either" to the end of paragraph (b) there shall be substituted

“the officer is satisfied, having regard to the number and description of—

(a) those machines which are authorised by the ordinary licence or licences produced to him ; and

(b) those machines displaying special licences ;

that there has been a contravention of section 21(1) or 24 of this Act,”.

PART II Transitional Provisions

Whole-year licences during transitional period

8 (1) A whole-year ordinary licence in respect of any premises shall, if first having effect after 30th September 1984 but before the latest date specified (in relation to the region in which the premises are situated) in the second column of the following Table, be granted for a period determined by reference to the Table.

TABLE

Region in which premises are situated	Date on which licence first has effect	Period for which licence is to be granted
References in this Table to named regions shall be construed as in section 21 of the [1981 c. 63.] Betting and Gaming Duties Act 1981.
1. First.	(a) Before 1st May 1985.	Seven months beginning with 1st October 1984.
	(b) After 30th April 1985 but before 1st December 1985.	Seven months beginning with 1st May 1985.
2. Second.	(a) Before 1st June 1985.	Eight months beginning with 1st October 1984.
	(b) After 31st May 1985 but before 1st February 1986.	Eight months beginning with 1st June 1985.
3. Third.	Before 1st June 1985.	Eight months beginning with 1st October 1984.
4. Fourth.	Before 1st August 1985.	Ten months beginning with 1st October 1984.

(2) Where, by virtue of sub-paragraph (1) above, a whole-year licence is granted for a period of 7, 8 or 10 months, the duty payable on the licence shall be 7/12ths, 8/12ths or, as the case may be, 10/12ths of the appropriate amount set out in the relevant Table in section 23 of the Act of 1981.

(3) In relation to a whole-year licence falling within sub-paragraph (1) above, paragraph 11 of Schedule 4 to the Act of 1981 shall have effect as if—

(a) in a case falling within paragraph 11(1)(b), the appropriate fraction were 17/35ths for a seven-month licence, 11/20ths for an eight-month licence and 16/25ths for a ten-month licence;

(b) in a case falling within paragraph 11(1)(c), the appropriate fraction were 2/35ths for a seven-month licence, 7/40ths for an eight-month licence and 17/50ths for a ten-month licence; and

(c) in a case falling within paragraph 11(1)(d). no provision were made for repayment of duty.

Section 8.

SCHEDULE 4 FREE ZONES

PART I Provisions inserted in [1979 c. 2.] Customs and Excise Management Act 1979 as Part VIIIA

“PART VIIIA FREE ZONES

100A Designation of free zones.

(1) The Treasury may by order designate any area in the United Kingdom as a special area for customs purposes.

(2) An area so designated shall be known as a " free zone ".

(3) An order under subsection (1) above—

(a) shall have effect for such period as shall be specified in the order;

(b) may be made so as to take effect, in relation to the area or any part of the area designated by a previous order under this section, on the expiry of the period specified in the previous order;

(c) shall appoint one or more persons as the responsible authority or authorities for the free zone;

(d) may impose on any responsible authority such conditions or restrictions as may be specified ; and

(e) may be revoked if the Commissioners are satisfied that there has been a failure to comply with any condition or restriction.

(4) The Treasury may by order—

(a) from time to time vary—

(i) the conditions or restrictions imposed by a designation order; or

(ii) with the agreement of the responsible authority, the area designated; or

(b) appoint one or more persons as the responsible authority or authorities for a free zone either in addition to or in substitution for any person appointed as such by a designation order.

(5) In this Act " designation order " means an order made under subsection (1) above.

(6) Any order under this section shall be made by statutory instrument.

100B Free zone regulations.

(1) The Commissioners may by regulations (in this Act referred to as " free zone regulations ") make provision with respect to the movement of goods into, and the removal of goods from, any free zone and the keeping, securing and treatment of goods which are within a free zone.

(2) Subject to any provision of the regulations, references In this Act to " free zone goods " are references to goods which are within a free zone.

100C Free zone goods: customs duties, etc.

(1) Subject to any contrary provision made by any directly applicable Community provision, goods which are chargeable with any customs duty or agricultural levy, or in respect of which any negative monetary compensatory amount is payable, may be moved into a free zone and may remain as free zone goods without payment of that duty, levy or amount.

(2) Except in such cases as may be specified in free zone regulations, subsection (1) above shall not apply in relation to goods which are chargeable with any excise duty unless that duty has been paid and not repaid.

(3) Without prejudice to the generality of section 100B above, free zone regulations may make provision—

(a) for enabling the Commissioners to allow goods to be removed from a free zone without payment of customs duty, agricultural levy, or any negative monetary compensatory amount, in such circumstances and subject to such conditions as they may determine;

(b) for determining, where any customs duty, agricultural levy or negative monetary compensatory amount becomes payable in respect of goods which cease to be free zone goods—

(i) the rates of any duty, levy or monetary compensatory amount applicable; and

(ii) the time at which those goods cease to be free zone goods;

(c) for determining, for the purpose of enabling customs duty or agricultural levy to be charged or any negative monetary compensatory amount to be paid in respect of free zone goods in a case where a person wishes to pay that duty or levy or to receive the negative monetary compensatory amount notwithstanding that the goods will continue to be free zone goods, the rate of duty, levy or negative monetary compensatory amount to be applied; and

(d) permitting free zone goods to be destroyed without payment of any customs duty, agricultural levy or negative monetary compensatory amount in such circumstances and subject to such conditions as the Commissioners may determine.

(4) Without prejudice to the generality of section 100B above, free zone regulations may make provision—

(a) for relief from the whole or part of any value added tax chargeable on the importation of goods into the United Kingdom in such circumstances as they may determine;

(b) in place of, or in addition to, any provision made by section 4 or 5 of the [1983 c. 55.] Value Added Tax Act 1983 or any other enactment, for determining the time when a supply of goods which are or have been free zone goods is to be treated as taking place for the purposes of the charge to value added tax; and

(c) as to the treatment, for the purposes of value added tax, of goods which are manufactured or produced within a free zone from other goods or which have other goods incorporated in them while they are free zone goods.

(5) In this section—

• "agricultural levy" means any tax or charge, not being a customs duty, provided for under the common agricultural policy or under any special arrangements which, pursuant to Article 235 of the EEC Treaty, are applicable to goods resulting from the processing of agricultural products ;

• " negative monetary compensatory amount" means an amount granted on importation under the [O.J. No. L138/1.] Regulation of the Commission of the European Communities dated 19th May 1981 No. 1371/81 or any Community provision for the time being amending or replacing that Regulation.

100D Free zone regulations: supplemental.

(1) Without prejudice to the generality of section 100B above, free zone regulations may make provision—

(a) specifying the circumstances in which goods which are within a free zone are to be treated, for the purposes of this Act and the regulations, as not being free zone goods ;

(b) specifying the circumstances in which goods which are not within a free zone are to be treated, for those purposes, as being within a free zone ;

(c) requiring any goods which are within a free zone to be produced to, or made available for inspection by, an officer on request by him ;

(d) imposing, or providing for the Commissioners to impose by direction, conditions and restrictions to which free zone goods are to be subject;

(e) prohibiting the carrying out on free zone goods of operations other than those prescribed by, or allowed under, the regulations ;

(f) requiring any permitted operations to be carried out in such manner and subject to such conditions and restrictions as may be imposed by or under the regulations ;

(g) imposing, or providing for the Commissioners to impose by direction, obligations on responsible authorities in relation to the security of free zones and in respect of conditions and restrictions imposed by designation orders;

(h) enabling the Commissioners to recover from any responsible authority expenditure incurred by the Commissioners in consequence of any failure by that authority to comply with any requirements imposed by or under the regulations ;

(i) imposing, or providing for the Commissioners to impose by direction, requirements on the occupier of any premises, or proprietor of any goods, within a free zone to keep and preserve records relating to his business as such an occupier or proprietor and to produce them to an officer when required to do so for the purpose of allowing him—

(i) to inspect them ;

(ii) to copy or take extracts from them ; or

(iii) to remove them at a reasonable time and for a reasonable period;

(j) imposing, or providing for the Commissioners to impose by direction, on the responsible authority requirements in connection with any provision made by virtue of paragraph (i) above ;

(k) providing for the Commissioners to specify by direction the information which must be given to them in connection with free zone goods and the form in which, persons by whom and time within which, it must be given ;

(l) for the forfeiture of goods in the event of non-compliance with any condition or restriction imposed by virtue of paragraph (f) above or in the event of the carrying out of any operation on free zone goods which is not by virtue of paragraph (e) above permitted to be carried out on such goods.

(2) Free zone regulations may make different provision for goods or services of different classes or descriptions or for goods or services of the same class or description in different circumstances.

(3) If any person fails to comply with any free zone regulation or with any condition, restriction or requirement imposed under a free zone regulation he shall be liable on summary conviction to a penalty of level 3 on the standard scale together with a penalty of £20 for each day on which the failure continues.

100E Control of trading in free zones.

(1) No person shall carry on any trade or business in a free zone unless he is authorised to do so by the Commissioners.

(2) An authorisation under this section may be granted for such period and subject to such conditions as the Commissioners consider appropriate.

(3) The Commissioners may at any time for reasonable cause revoke, or vary the terms of, any authorisation under this section.

(4) If any person—

(a) contravenes subsection (1) above, or

(b) fails to comply with any condition imposed under subsection (2) above,

he shall be liable on summary conviction to a penalty of level 3 on the standard scale.

100F Powers of search.

(1) Any person entering or leaving a free zone shall answer such questions as any officer may put to him with respect to any goods and shall, if required by the officer, produce those goods for examination at such place as the Commissioners may direct.

(2) At any time while a vehicle is entering or leaving a free zone, any officer may board the vehicle and search any part of it.

(3) Any officer may at any time enter upon and inspect a free zone and all buildings and goods within the zone.”.

PART II Further Amendments of 1979 Act

1 In section 1 (interpretation) the following definitions shall be inserted at the appropriate places—

• “'designation order' has the meaning given by section 100A(5);

• ' free zone' has the meaning given by section 100A(2);

• ' free zone goods' has the meaning given by section 100B(2);

• 'free zone regulations' has the meaning given by section 100B(1);”.

2 In section 31(1) (power to make regulations controlling the movement of goods)—

(a) in paragraph (a) after the words " clearance out of charge of such goods " there shall be inserted the words " , a free zone "; and

(b) after paragraph (a) there shall be inserted—

“(aa) the movement of goods between—

(i) a free zone and a place approved by the Commissioners for the clearance out of charge of such goods,

(ii) such a place and a free zone, and

(iii) a free zone and another free zone;”

3 In section 37 (entry of goods on importation)—

(a) in subsection (2), the following paragraph shall be inserted after paragraph (a)—

“(aa) free zone goods (other than goods which are chargeable with any excise duty);”;

(b) in subsection (3), the following paragraph shall be inserted after paragraph (a)—

“(aa) in the case of goods which are chargeable with any excise duty, as free zone goods;”.

4 In section 119(1) (delivery of imported goods on giving of security for duty) after "warehouse" there shall be inserted the words " or free zone ".

5 In section 159 (power to examine and take account of goods), in subsection (1) there shall be inserted after paragraph (b)—

“(bb) which are in a free zone; or”.

6 In section 164 (power to search persons) in subsection (4) there shall be inserted after paragraph (e)—

“(ee) any person in, entering or leaving a free zone ;”.

Section 9.

SCHEDULE 5 ENTRY ON IMPORTATION:AMENDMENT OF [1979 c. 2.] CUSTOMS AND EXCISE MANAGEMENT ACT 1979

1 In paragraph (d) of subsection (3) of section 37 (entry of goods on importation for inward processing) after the words " inward processing " there shall be inserted the words " or other processing under Community arrangements ".

2 The following sections shall be inserted after section 37—

“37A Initial and supplementary entries.

(1) Without prejudice to section 37 above, a direction under that section may—

(a) provide that where the importer is authorised for the purposes of this section, the entry may consist of an initial entry and a supplementary entry; and

(b) may make such supplementary provision in connection with entries consisting of initial and supplementary entries as the Commissioners think fit.

(2) Where an initial entry of goods has been accepted the goods may, on the importer giving security by deposit of money or otherwise to the satisfaction of the Commissioners for payment of the unpaid duty, be delivered without payment of any duty chargeable in respect of the goods, but any such duty shall be paid within such time as the Commissioners may direct.

(3) An importer who makes an initial entry shall complete the entry by delivering the supplementary entry within such time as the Commissioners may direct

(4) For the purposes of the customs and excise Acts an entry of goods shall be taken to have been delivered when an initial entry of the goods has been delivered, and accepted when an initial entry has been accepted.

37B Postponed entry.

(1) The Commissioners may, if they think fit, direct that where—

(a) such goods as may be specified in the direction are imported by an importer authorised for the purposes of this subsection ;

(b) the importer has delivered a document relating to the goods to the proper officer, in such form and manner, containing such particulars and accompanied by such documents as the Commissioners may direct; and

(c) the document has been accepted by the proper officer,

the goods may be delivered before an entry of them has been delivered or any duty chargeable in respect of them has been paid.

(2) The Commissioners may, if they think fit, direct that where—

(a) such goods as may be specified in the direction are imported by an importer authorised for the purposes of this subsection ;

(b) the goods have been removed from the place of importation to a place approved by the Commissioners for the clearance out of charge of such goods; and

(c) the conditions mentioned in subsection (3) below have been satisfied,

the goods may be delivered before an entry of them has been delivered or any duty chargeable in respect of them has been paid.

(3) The conditions are that—

(a) on the arrival of the goods at the approved place the importer delivers to the proper officer a notice of the arrival of the goods in such form and containing such particulars as may be required by the directions;

(b) within such time as may be so required the importer enters such particulars of the goods and such other information as may be so required in a record maintained by him at such place as the proper officer may require ; and

(c) the goods are kept secure in the approved place for such period as may be required by the directions.

(4) The Commissioners may direct that the condition mentioned in subsection (3)(a) above shall not apply in relation to any goods specified in the direction and such a direction may substitute another condition.

(5) No goods shall be delivered under this section unless the importer gives security by deposit of money or otherwise to the satisfaction of the Commissioners for the payment of any duty chargeable in respect of the goods which is unpaid.

(6) Where goods of which no entry has been made have been delivered under this section, the importer shall deliver an entry of the goods under section 37(1) above within such time as the Commissioners may direct.

(7) For the purposes of section 43(2)(a) below such an entry shall be taken to have been accepted—

(a) in the case of goods delivered by virtue of a direction under subsection (1) above, on the date on which the document mentioned in that subsection was accepted ; and

(b) in the case of goods delivered by virtue of a direction under subsection (2) above, on the date on which particulars of the goods were entered as mentioned in subsection (3)(b) above.

37C Provisions supplementary to ss. 37A and 37B.

(1) The Commissioners may, if they think fit—

(a) authorise any importer for the purposes of section 37A, or 37B(1) or (2) above ; and

(b) suspend or cancel the authorisation of any importer where it appears to them that he has failed to comply with any requirement imposed on him by or under this Part of this Act or that there is other reasonable cause for suspension or cancellation.

(2) The Commissioners may give directions—

(a) imposing such requirements as they think fit on any importer authorised under this section ; or

(b) varying any such requirements previously imposed.

(3) If any person without reasonable excuse contravenes any requirement imposed by or under section 37A, 37B or this section he shall be liable on summary conviction to a penalty of level 4 on the standard scale.”

3 In section 171 (general provisions as to offences and penalties) after subsection (2) there shall be inserted the following subsection—

“(2A) In this Act " the standard scale " has the meaning assigned to it by section 75 of the [1982 c. 48.] Criminal Justice Act 1982 and for the purposes of this subsection—

(a) section 37 of that Act; and

(b) an order under section 143 of the [1980 c. 43.] Magistrates' Courts Act 1980 which alters the sums specified in subsection (2) of section 37,

shall extend to Northern Ireland, and section 75 of the 1982 Act shall have effect as if after the words " England and Wales " there were inserted the words " or Northern Ireland”.

Section 10.

SCHEDULE 6 MODIFICATIONS OF SCHEDULE 5 TO [1983 c. 55.] VALUE ADDED TAX ACT 1983

PART I Food

1 In Group 1 (Food), in Note (3) (which provides that a supply in the course of catering includes a supply for consumption on the premises) after the word " includes " there shall be inserted " (a) " and at the end of the Note there shall be added “and

(b) any supply of hot food for consumption off those premises; and for the purpose of paragraph (b) above ' hot food' means food which, or any part of which,—

(i) has been heated for the purpose of enabling it to be consumed at a temperature above the ambient air temperature; and

(ii) is at the time of the supply above that temperature”.

PART II Construction of buildings etc.

2 Group 8 (construction of buildings etc.) shall be amended in accordance with this Part of this Schedule.

3 In item 2 (supply of services in the course of certain operations relating to buildings and civil engineering works), for paragraphs (a) and (b) there shall be substituted the words " in the course of the construction or demolition of ".

4 In item 3 (supply, by a person supplying services within item 2 and in connection with those services, of certain materials etc. and services relating to them) after the words " item 2 " there shall be inserted the words " of this Group or of Group 8A below ".

5 After Note (1) there shall be inserted the following Note:—

“(1A) Any reference in item 2 or the following Notes to the construction of any building or the construction of any civil engineering work does not include a reference to the conversion, reconstruction, alteration or enlargement of any existing building or civil engineering work, and the reference in item 1 to a person constructing a building shall be construed accordingly.”

6 (1) In Note (2) (matters excluded from item 2), for paragraph (a) (which excluded repair or maintenance and is rendered unnecessary by the removal from item 2 of the reference to alteration) there shall be substituted the following paragraph:—

“(a) the supply of any services in the course of the construction of any building ("the secondary building") within the grounds or garden of another building ("the main building ") which is used or to be used wholly or mainly as a private residence except—

(i) where the secondary building is itself to be so used; or

(ii) where the secondary building is a garage which is to be used and occupied together with another building which is being constructed at the same time as the secondary building and which is either the main building or another secondary building which is to be used wholly or mainly as a private residence.”

(2) In that Note—

(a) in paragraph (b), the words " or alteration ", and

(b) paragraph (c) (supply of services otherwise than in the course or furtherance of a business),

shall be omitted.

7 After Note (2) there shall be inserted the following Note:—

“(2A) In item 3, the goods referred to in paragraph (a) do not include—

(a) finished or prefabricated furniture, other than furniture designed to be fitted in kitchens; or

(b) materials for the construction of fitted furniture, other than kitchen furniture; or

(c) domestic electrical or gas appliances, other than those designed to provide space heating or water heating or both.”

PART III Protected Buildings

8 After Group 8 there shall be inserted the following—

“GROUP 8A—PROTECTED BUILDINGS

1 Item No.

The granting, by a person substantially reconstructing a protected building, of a major interest in, or in any part of, the building or its site.

2 The supply, in the course of an approved alteration of a protected building, of any services other than the services of an architect, surveyor or any person acting as consultant or in a supervisory capacity.

Notes

(1) ' Protected building' means a building which is—

(a) a listed building, within the meaning of—

(i) the [1971 c. 78.] Town and Country Planning Act 1971 ; or

(ii) the [1972 c. 52.] Town and Country Planning (Scotland) Act 1972; or

(iii) the [S.I. 1972/1634 (N.I. 17).] Planning (Northern Ireland) Order 1972 ; or

(b) a scheduled monument, within the meaning of—

(i) the [1979 c. 46.] Ancient Monuments and Archaeological Areas Act 1979 ; or

(ii) the [1971 c. 17 (N.I.).] Historic Monuments Act (Northern Ireland) 1971.

(2) For the purposes of item 1, a protected building shall not be regarded as substantially reconstructed unless the reconstruction is such that at least one of the following conditions is fulfilled when the reconstruction is completed—

(a) that, of the works carried out to effect the reconstruction, at least three-quarters, measured by reference to cost, are of such a nature that the supply of services (other than excluded services) materials and other items to carry out the works, would, if supplied by a taxable person, be within either item 2 of this Group or item 3 of Group 8 above, as it applies to a supply by a person supplying services within item 2 of this Group ; and

(b) that the reconstructed building incorporates no more of the original building (that is to say, the building as it was before the reconstruction began) than the external walls, together with other external features of architectural or historic interest;

and in paragraph (a) above ' excluded services' means the services of an architect, surveyor or other person acting as consultant or in a supervisory capacity.

(3) ' Approved alteration' means,—

(a) in the case of a protected building which is an ecclesiastical building which is for the time being used for ecclesiastical purposes or would be so used but for the works in question, any works of alteration ; and

(b) in the case of a protected building which is a scheduled monument within the meaning of the [1971 c. 17 (N.I.).] Historic Monuments Act (Northern Ireland) 1971 and in respect of which a protection order, within the meaning of that Act, is in force, works of alteration for which consent has been given under section 10 of that Act; and

(c) in any other case, works of alteration which may not, or

but for the existence of a Crown interest or Duchy interest could not, be carried out unless authorised under, or under any provision of,—

(i) Part IV of the [1971 c. 78.] Town and Country Planning Act 1971,

(ii) Part IV of the [1972 c. 52.] Town and Country Planning (Scotland) Act 1972,

(iii) Part V of the [S.I. 1972/1634 (N.I. 17).] Planning (Northern Ireland) Order 1972, or

(iv) Part I of the [1979 c. 46.] Ancient Monuments and Archaeological Areas Act 1979,

and for which, except in the case of a Crown interest or Duchy interest, consent has been obtained under any provision of that Part;

and in paragraph (c) above 'Crown interest' and 'Duchy interest ' have the same meaning as in section 50 of the said Act of 1979.

(4) For the purposes of paragraph (a) of Note (3), a building used or available for use by a minister of religion wholly or mainly as a residence from which to perform the duties of his office shall be treated as not being an ecclesiastical building.

(5) Where the benefit of the consideration for the grant of a major interest as described in item 1 accrues to the person substantially reconstructing the protected building but that person is not the grantor, he shall be treated for the purposes of that item as the person making the grant.

(6) In item 2 ' alteration' does not include repair or maintenance ; and where any work consists partly of an approved alteration and partly of other work, an apportionment shall be made to determine the supply which falls within item 2.

(7) Note (2) to Group 8 above applies in relation to item 2 of this Group as it applies in relation to item 2 of that Group.”

Section 17.

SCHEDULE 7 THE ADDITIONAL RATE

1 In subsection (1) of section 32 of the [1971 c. 68.] Finance Act 1971, for the words following paragraph (b) there shall be substituted the words " and, in relation to any year of assessment, any reference in the Income Tax Acts to the additional rate is a reference to a rate determined by subtracting the basic rate for that year from the rate of tax which, for that year, is applicable to the second higher rate band ".

2 (1) In the definition of " excess liability" or, as the case may be, "excess amount" wherever it appears in the enactments specified in sub-paragraph (2) below, the words " or additional" shall be omitted.

(2) The enactments referred to in sub-paragraph (1) above are the following, namely—

(a) sections 30(3), 36(1), 403(1), 424(c), 430(1), 457(1) and 458(1) of the Taxes Act;

(b) section 87(6) of and paragraph 5(6A) of Schedule 16 to the [1972 c. 41.] Finance Act 1972 ; and

(c) paragraph 19(1A) of Schedule 2 to the [1975 c. 7.] Finance Act 1975.

3 (1) In the Taxes Act, in section 38(2), the words from " and in determining " to " investment income " shall be omitted.

(2) In the Finance Act 1971, sections 32(3) and (4) and 34(4) and, in paragraph 2(2) of Schedule 7, the words "or additional" shall be omitted.

(3) In the [1973 c. 51.] Finance Act 1973, in section 44, the words " or additional " and, in section 59(2), the words from " the additional rate " to " them, and " shall be omitted.

(4) In the [1974 c. 36.] Finance Act 1974, there shall be omitted—

(a) section 15;

(b) in section 16(1), the words following " subsection (2) below";

(c) in section 43(1), the words from " In this subsection" onwards ; and

(d) in Schedule 7, paragraph 1 and, in paragraph 9(5), the words from " and " onwards.

(5) In section 24(3) of the [1980 c. 48.] Finance Act 1980, for the word " amounts" there shall be substituted the word " amount " ; and the words from "or over which" to "additional rate", the word "respectively", where it first occurs, and the words "and the investment income threshold " shall be omitted.

Section 27(3).

SCHEDULE 8 INTEREST PAID ON DEPOSITS WITH BANKS ETC

General

1 (1) In this Schedule "the principal section" means section 27 of this Act

(2) Any amount which is credited as interest in respect of a relevant deposit shall, for the purposes of the principal section and (his Schedule, be treated as a payment of interest

Meaning of " deposit-taker "

2 (1) In the principal section and in this Schedule "deposit-taker " means any of the following—

(a) the Bank of England ;

(b) any recognised bank, licensed institution or municipal bank (within die meaning of the [1979 c. 37.] Banking Act 1979);

(c) the Post Office;

(d) any trustee savings bank within the meaning of the [1981 c. 65.] Trustee Savings Banks Act 1981 ;

(e) any bank formed under the [1819 c. 62.] Savings Bank (Scotland) Act 1819; and

(f) any person or class of person which receives deposits in the course of his business or activities and which is for the time being prescribed by order made by the Treasury by statutory instrument for the purposes of this section.

(2) Where the Treasury makes an order under sub-paragraph (1)(f) above, the order shall have effect from the beginning of the first year of assessment which begins after the date on which the order is made.

(3) An order under sub-paragraph (1)(f) above shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

Meaning of " deposit" and " relevant deposit"

3 (1) In the principal section and in this Schedule " deposit" means a sum of money paid on terms under which it will be repaid with or without interest and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person to whom it is made.

(2) For the purposes of the principal section and this Schedule, a deposit is a " relevant deposit" if, but only if—

(a) the person who is beneficially entitled to any interest in respect of the deposit is an individual or, where two or more persons are so entitled, all of them are individuals ; or

(b) the person entitled to any such interest receives it as a personal representative in his capacity as such ;

and the deposit is not prevented from being a relevant deposit by sub-paragraph (3) below.

(3) A deposit is not a relevant deposit if—

(a) a qualifying certificate of deposit has been issued in respect of it or it is a qualifying time deposit;

(b) it is a debt on a debenture (" debenture " having the meaning given in section 455 of the [1948 c. 38.] Companies Act 1948) issued by the deposit-taker ;

(c) it is a loan made by a deposit-taker in the ordinary course of his business or activities ;

(d) it is a debt on a security which is listed on a recognised stock exchange (within the meaning of section 535 of the Taxes Act);

(e) it is made by a Stock Exchange money broker (recognised by the Bank of England) in the course of his business as such a broker;

(f) in the case of a deposit-taker resident in the United Kingdom for the purposes of income or corporation tax, it is held at a branch of his situated outside the United Kingdom ;

(g) in the case of a deposit-taker who is not so resident, it is held otherwise than at a branch of his situated in the United Kingdom ; or

(h) the appropriate person has declared in writing to the deposit-taker liable to pay interest in respect of the deposit that—

(i) at the time when the declaration is made, the person who is beneficially entitled to the interest is not, or, as the case may be, all of the persons who are so entitled are not, ordinarily resident in the United Kingdom ;

(ii) in a case falling within sub-paragraph (2)(b) above, the deceased was, immediately before his death, not ordinarily resident in the United Kingdom.

(4) A declaration under sub-paragraph (3)(h)(i) shall contain an undertaking by the person making it that if the person, or any of the persons, in respect of whom it is made becomes ordinarily resident in the United Kingdom he will notify the deposit-taker accordingly.

(5) A deposit-taker shall, on being so required by notice given to him in writing by an inspector, make all declarations which have been made to him under sub-paragraph (3) above available for inspection by the inspector or by a named officer of the Board.

(6) Where a notice has been given to a deposit-taker under sub-paragraph (5) above, the declarations shall be made available within such time as may be specified in the notice; and the person to whom they are to be made available may take copies of, or extracts from, them.

(7) A deposit-taker shall treat every deposit made with him as a relevant deposit unless satisfied that it is not a relevant deposit; but where he has satisfied himself that a deposit is not a relevant deposit he shall be entitled to continue to so treat it until such time as he is in possession of information which can reasonably be taken to indicate that the deposit is, or may be, a relevant deposit.

(8) In sub-paragraph (3) above—

• " appropriate person", in relation to a deposit, means any person who is beneficially entitled to any interest in respect of the deposit or entitled to receive any such interest as a personal representative in his capacity as such or to whom any such interest is payable ;

• " qualifying certificate of deposit" means a certificate of deposit, as denned in section 55(3) of the [1968 c. 44.] Finance Act 1968, which is issued by a deposit-taker and under which—

  (a)

  the amount payable by the deposit-taker, exclusive of interest, is not less than £50,000 (or, for a deposit denominated in foreign currency, not less than the equivalent of £50,000 at the time when the deposit is made); and

  (b)

  the obligation of the deposit-taker to pay that amount arises after a period of not less than 28 days beginning with the date on which the deposit is made ; and

• " qualifying time deposit" means a deposit which is made by way of loan for an amount which is not less than £50,000 (or, for a deposit denominated in foreign currency, not less than the equivalent of £50,000 at the time when the deposit is made) and on terms which—

  (a)

  prevent repayment of the deposit before the expiry of the period of 28 days beginning with the date on which the deposit is made, but which require repayment at the end of a specified period ;

  (b)

  do not make provision for the transfer of the right to repayment; and

  (c)

  prevent partial withdrawals of, or additions to, the deposit.

(9) For the purposes of sub-paragraph (3)(f) and (g) above, a deposit is held at a branch of a deposit-taker if it is recorded in his books as a liability of that branch.

Assessments to income tax etc.

4 (1) Where in relation to any payment of interest (the "payment ") a deposit-taker is liable to account for and pay an amount under the principal section—

(a) subject to sub-paragraph (2) below, no assessment to income tax shall be made on, and no repayment of income tax shall be made to, the person receiving or entitled to the payment in respect of it;

(b) the payment shall, in computing the total income of the person entitled to it, be treated as income for that year received by him after deduction of income tax at the basic rate from a corresponding gross amount; and

(c) the payment (and no more) shall, in applying sections 52 and 53 of the Taxes Act to other payments be treated as profits or gains which have been brought into charge to income tax.

(2) Sub-paragraph (1)(a) above shall not prevent an assessment in respect of income tax at a rate other than the basic rate.

(3) For the purpose of determining whether any or what amount of tax is, by virtue of sub-paragraph (1)(b) above, to be taken into account as having been deducted from a gross amount in the case of an individual whose total income is reduced by any deductions, so much only of that gross amount shall be taken into account as is part of his total income as so reduced.

Collection

5 (1) Any payment of interest in respect of which an amount is payable under the principal section shall be a relevant payment for the purposes of Schedule 20 to the [1972 c. 41.] Finance Act 1972 (collection of income tax on company payments which are not distributions) whether or not the deposit-taker making the payment is resident in the United Kingdom.

(2) Schedule 20 to that Act shall apply in relation to any payment which is a relevant payment by virtue of sub-paragraph (1) above—

(a) with the substitution for any reference to a company of a reference to a deposit-taker ;

(b) as if any amount payable under the principal section were payable as income tax ;

(c) as if paragraph 5 (set-off of income tax on deposit-taker's income against liability under the principal section) applied only in relation to payments received by the deposit-taker after 5th April 1985 and falling to be taken into account in computing his income chargeable to corporation tax; and

(d) as if in paragraph 7 (amounts set-off under paragraph 5 not to be set-off also under section 240(5) of the Taxes Act) the reference to section 240(5) included a reference to sections 53 and 246(3) of that Act.

(3) In relation to any deposit-taker who is not a company Schedule 20 shall have effect as if—

(a) paragraph 5 were omitted ; and

(b) references to accounting periods were references to periods for which the deposit-taker makes up his accounts.

Transitional provisions

6 (1) Any deposit denominated in a foreign currency shall not be treated, at any time before 6th April 1986, as a relevant deposit.

(2) A certificate of deposit, as defined in section 55(3) of the [1968 c. 44.] Finance Act 1968, which was issued before 13th March 1984 on terms which provide for interest to be payable on the deposit at any time after 5th April 1985 (whether or not interest is payable on it before that date) shall, if it is not a qualifying certificate of deposit, be treated for the purposes of paragraph 3(3) of this Schedule as if it were a qualifying certificate of deposit.

(3) Any deposit which was made before 6th July 1984 but which is not a qualifying time deposit shall, where it is made on terms which—

(a) do not make provision for the transfer of the right to repayment;

(b) prevent partial withdrawals of, or additions to, the deposit; and

(c) require—

(i) the deposit-taker to repay the sum at the end of a specified period which ends after 5th April 1985 ; or

(ii) in a case where interest is payable only at the time of repayment of the deposit, the deposit-taker to repay the sum on demand or on notice ;

be treated, for the purposes of paragraph 3(3) of this Schedule, as if it were a qualifying time deposit.

(4) A declaration made before 6th July 1984 under section 17(4) of the [1970 c. 9.] Taxes Management Act 1970 which contains an undertaking of the kind referred to in sub-paragraph (4) of paragraph 3 of this Schedule shall, at all times before 6th April 1988, be treated as a declaration made for the purposes of that paragraph.

(5) Where a deposit which is a source of income of any person (the " lender") is not a composite rate deposit but at any time becomes such a deposit, section 121 of the Taxes Act (special rules where source of income ceases) shall apply as if the deposit were a source of income which the lender ceased to possess immediately before it became a composite rate deposit.

(6) Where a deposit becomes a composite rate deposit on 6th April 1985, section 121 of the Taxes Act shall apply in relation to it with the omission from subsection (1)(b) of the words from " and shall" to " this provision ".

(7) Where a deposit which is a source of income of any person ceases to be a composite rate deposit, section 120(3) of the Taxes Act shall apply as if the deposit were a new source of income acquired by him immediately after it ceased to be a composite rate deposit.

(8) For the purposes of sub-paragraphs (5) to (7) above a deposit is at any time a composite rate deposit if, were the person holding it to make a payment of interest in respect of it at that time, he would be liable to account for and pay an amount on that payment under the principal section.

Penalties

7 The Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties) shall be amended by inserting at the end of the first column—

“Paragraph 3(3)(h) and (5) of Schedule 8 to the Finance Act 1984”.

Section 36(1).

SCHEDULE 9 DEEP DISCOUNT SECURITIES

Charge to tax

1 (1) On the disposal by any person of any deep discount security—

(a) an amount which represents the accrued income attributable to the period between his acquisition and disposal of the security (the " period of ownership") shall be treated as income chargeable to tax under Case III or, as may be, Case IV of Schedule D ;

(b) the tax shall (notwithstanding anything in sections 119 to 121 or, as may be, 122 to 124 of the Taxes Act but subject to sub-paragraph (5) below) be computed on the income so arising from any disposal made in the year of assessment ; and

(c) in computing the gain accruing on the disposal for the purposes of capital gains tax—

(i) section 31 of the [1979 c. 14.] Capital Gains Tax Act 1979 shall not apply but the consideration for the disposal shall be treated as reduced by the amount mentioned in paragraph (a) above ; and

(ii) where that amount exceeds the consideration for the disposal, the amount of the excess shall be treated as expenditure within section 32(1)(b) of that Act incurred by him on the security immediately before the disposal.

(2) The amount which represents the accrued income attributable to any period of ownership is the aggregate of the income elements for each income period or part of an income period in the period of ownership.

(3) In relation to any security, the income element for any income period shall be determined by applying the formula—

where

• A is the adjusted issue price ;

• B is the yield to maturity; and

• C is the amount of interest (if any) attributable to the income period.

(4) The income element for any period (the "short period") falling within an income period shall be determined by applying the formula—

where

• I is the income element for the income period in which the short period falls ;

• P is the number of days in the short period ; and

• Y is the number of days in that income period.

(5) Where—

(a) by virtue of sub-paragraph (1) above income tax is chargeable under Case IV of Schedule D, and

(b) the person making the disposal satisfies the Board, on a claim in that behalf, that he is not domiciled in the United Kingdom, or that, being a British subject or a citizen of the Republic of Ireland, he is not ordinarily resident in the United Kingdom,

the tax shall be computed on the amounts, if any, received in the United Kingdom in the year of assessment in question in respect of the sum mentioned in sub-paragraph (1)(a) above (any such amounts being treated as income arising when they are received in the United Kingdom).

(6) For the purposes of subsection (5) 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, the United Kingdom ; and

(b) subsections (4) to (7) of section 122 of the Taxes Act shall apply as they apply for the purposes of subsection (3) of that section.

(7) In this Schedule—

• " adjusted issue price ", in relation to any security in a particular income period, is the aggregate of the issue price of the security and the income elements for all previous income periods;

• " income period " means—

  (a)

  in the case of a security carrying a right to interest, any period to which a payment of interest which falls to be made in respect of the security is attributable; and

  (b)

  in any other case, any year ending immediately before the anniversary of the issue of the security or any period of less than a year which begins on such an anniversary and ends on the redemption date ;

• "yield to maturity", in relation to any security, means a rate (expressed as a percentage) such that if a sum equal to the issue price of the security were to be invested at that rate on the assumption that—

  (a)

  the rate would be applied on a compounding basis at the end of each income period ; and

  (b)

  the amount of any interest attributable to an income period would be deducted after applying the rate, the value of that sum at the redemption date would be equal to the amount payable on redemption of the security.

(8) Every company which issues deep discount securities shall cause to be shown on the certificate of each such security the income element for each income period between the date of issue of the security and the redemption date.

(9) Sections 52 to 54 of the Taxes Act (deduction of income tax by persons making certain payments) and section 159 of that Act (foreign dividends) shall not apply to so much of the proceeds of redemption of a deep discount security as represents income chargeable to tax under Case III or, as may be, Case IV of Schedule D.

Meaning of " disposal"

2 (1) Subject to sub-paragraph (2) and paragraph 8 below, there is a disposal of a deep discount security for the purposes of this Schedule if there would be such a disposal for the purposes of the [1979 c. 14.] Capital Gains Tax Act 1979.

(2) Notwithstanding anything in section 49(1)(b) of the Act of 1979 (no deemed disposal on death), where the assets of which a deceased person was competent to dispose include any deep discount security that security shall, for the purposes of this Schedule, be deemed to have been disposed of by the deceased immediately before his death.

Deduction of income element from total profits of company and allowance as charge on income

3 (1) In computing the corporation tax chargeable for any accounting period of a company which has issued any deep discount security, the income element in respect of that security for any income period ending in or with that accounting period shall be allowed as a deduction against the total profits of the company for the accounting period as reduced by any relief other than group relief.

(2) The income element for any income period ending in or with an accounting period of a company which has issued a deep discount security shall be treated for the purposes of the Corporation Tax Acts, other than those of section 248(1) of the Taxes Act (which makes provision, in relation to charges, similar to that made by sub-paragraph (1) above) as a charge on income paid by the company in the accounting period.

(3) No income element in respect of any deep discount security shall be so allowed or treated unless—

(a) the cost of paying so much of the amount payable on redemption as represents the discount is ultimately borne by the company;

(b) the income element would not otherwise be deductible in computing the issuing company's profits or any description of those profits for purposes of corporation tax ; and

(c) one or more of the conditions mentioned in sub-paragraph (4) below are satisfied.

(4) The conditions are that—

(a) the company exists wholly or mainly for the purpose of carrying on a trade ;

(b) the deep discount security was issued wholly and exclusively to raise money for purposes of a trade carried on by the company;

(c) the company is an investment company, as defined by section 304(5) of the Taxes Act.

(5) Where, on redemption of any deep discount security any part of the amount payable on redemption is, by virtue of section 233(2)(d) of the Taxes Act, a distribution of the company for the purposes of the Corporation Tax Acts, sub-paragraphs (1) and (2) above shall not apply to any income element in respect of that security.

(6) Without prejudice to its application apart from this paragraph section 38 of the [1980 c. 48.] Finance Act 1980 (incidental costs of obtaining loan finance to be deductible in computing profits or gains to be charged under Case I or Case II of Schedule D and to be treated for certain purposes as expenses of management) shall apply in relation to any qualifying security as it applies in relation to loan stock the interest on which is deductible as mentioned in subsection (2) of that section.

(7) In sub-paragraph (6) above, " qualifying security " means any deep discount security in respect of which the income elements are deductible under sub-paragraph (1) above in computing the total profits of the company by which the incidental costs in question are incurred.

(8) Sub-paragraphs (6) and (7) above shall have effect in relation to expenditure incurred after 13th March 1984.

(9) Relief shall not be given under any provision of the Tax Acts in respect of any income element if (at any time) a scheme has been effected or arrangements have been made such that the sole or main benefit that might be expected to accrue to the company from the issue of the security in question is the obtaining of a reduction in tax liability by means of that relief.

(10) Subsections (2) and (3) of section 38 of the [1976 c. 40.] Finance Act 1976 (restriction of relief for payment of interest) shall apply in relation to sub-paragraph (9) above as they apply in relation to subsection (1) of that section.

4 (1) Section 15 of the [1975 c. 22.] Oil Taxation Act 1975 (oil extraction activities etc. ; charges on income) shall apply in relation to income elements in respect of deep discount securities and paragraph 3 above as it applies in relation to interest and section 248 of the Taxes Act (allowance of charges on income).

(2) In the application of section 15 to any deep discount security, subsection (2)(b) shall have effect as if the references to the rate at which interest was payable were references to the aggregate of the rate of interest payable and the amount of any income element in respect of the security for the period in question.

Securities issued and owned by associated companies or companies belonging to same group

5 (1) Where a deep discount security issued by a company is at any time beneficially owned by another company which is—

(a) an associated company (within the meaning of section 302 of the Taxes Act) of the issuing company ; or

(b) a member of a group of companies of which the issuing company is also a member;

sub-paragraphs (1) and (2) of paragraph 3 of this Schedule shall apply to any linked income element with the addition, after the words " the accounting period ", of the words " in which the security is redeemed ".

(2) In this paragraph " linked income element" means the income element in respect of the security in question for any income period in which the security is at any time beneficially owned by the other company.

(3) For the purposes of this paragraph, two companies shall be deemed to be members of a group of companies if one is a 51 per cent subsidiary of the other or both are 51 per cent, subsidiaries of a third company.

Close companies

6 (1) Where a deep discount security issued by a close company is at any time beneficially owned by—

(a) a participator in the company ;

(b) an associate of such a participator ; or

(c) a company of which such a participator has control,

sub-paragraphs (1) and (2) of paragraph 3 of this Schedule shall apply to any linked income element with the addition, after the words " the accounting period ", of the words " in which the security is redeemed ".

(2) In sub-paragraph (1) above " linked income element" means the income element in respect of the security in question for any income period in which the security is at any time beneficially owned by a person mentioned in that sub-paragraph.

(3) Any amount which a close company is allowed, by virtue of paragraph 3(1) of this Schedule, to deduct from its total profits for any accounting period shall be treated for the purposes of paragraph 3A of Schedule 16 to the [1972 c. 41.] Finance Act 1972 (apportionment amongst participators of interest paid by close company as if it were income of the company) as if it were interest paid by the company in that period.

(4) In this paragraph—

• "associate" has the meaning given in section 303(3) of the Taxes Act;

• " control " shall be construed in accordance with section 302(2) to (6) of that Act; and

• " participator " means a person who is, in relation to a company, a participator for the purposes of Chapter III of Part XI of the Taxes Act (by virtue of section 303 of that Act) other than a person who is a participator for those purposes by virtue only of his holding a deep discount security issued by the company.

(5) In determining whether a person who carries on a business of banking is a participator in a company for the purposes of this paragraph, there shall be disregarded any securities of the company acquired by him in the ordinary course of his business.

Early redemption

7 (1) Where any deep discount security is redeemed before the redemption date by the company which issued it, the preceding paragraphs shall have effect subject to the provisions of this paragraph.

(2) The accrued income attributable to the period between the acquisition of the security by the person who, immediately before its redemption, was the beneficial owner of the security and its redemption shall be the amount paid to him on redemption of the security less the issue price of the security or, in a case where he did not acquire it on its issue, less the aggregate of—

(a) the issue price; and

(b) the accrued income attributable to the period beginning with the issue, and ending with his acquisition, of the security.

(3) The deduction allowed under paragraph 3(1) above in relation to the accounting period in which the deep discount security is redeemed shall be the amount paid by the company on redemption less the aggregate of—

(a) the issue price of the security; and

(b) the accrued income attributable to the period beginning with the issue of the security and ending with the last income period to end in or with the accounting period of the company which precedes that in which the security is redeemed.

(4) Where paragraph 5 or 6 above has applied to the deep discount security at any time, the amount mentioned in sub-paragraph (3)(b) above shall not include any linked income element (within the meaning of that paragraph).

(5) Where the aggregate mentioned in sub-paragraph (3) above exceeds the amount paid by the company on redemption of the security, the amount of the excess or, if it is less, the amount mentioned in paragraph (b) of that sub-paragraph shall be treated as income of the company—

(a) arising in the accounting period in which the security is redeemed; and

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

(6) Where a resolution is passed, an order made or any other act takes place for the winding up of a company which has issued a deep discount security before the security is redeemed, this paragraph shall have effect in relation to any payment made in respect of the security in the course of the winding up as if the payment were made on redemption.

Reorganisations, conversions, reconstructions and amalgamations

8 (1) This paragraph applies where—

(a) there is a conversion of securities to which section 82 of the [1979 c. 14.] Capital Gains Tax Act 1979 applies and those securities include deep discount securities ; or

(b) securities including deep discount securities are exchanged (or by virtue of section 86(1) of that Act are treated as exchanged) for other securities in circumstances in which section 85(3) of that Act applies.

(2) Where this paragraph applies—

(a) the securities converted or exchanged shall (subject to sub-paragraph (3) below and notwithstanding section 78 of the Act of 1979) be treated for the purposes of the charge to tax under paragraph 1 of this Schedule as having been disposed of immediately before the time of the conversion, or, as the case may be, exchange, by the person who was the beneficial owner of the securities at that time ;

(b) sub-paragraph (1)(c) of that paragraph and section 31 of the Act of 1979 shall not apply, but any sum payable to the beneficial owner of the deep discount securities by way of consideration for their disposal (in addition to his new holding) shall be treated for the purposes of capital gains tax as reduced by the amount of the accrued income on which he is chargeable to income tax by virtue of paragraph (a) above ; and

(c) where that amount exceeds any such sum, the excess shall be treated as expenditure within section 32(1)(b) of that Act incurred by him on the security immediately before that time.

(3) Where a person would (but for this sub-paragraph) be treated by sub-paragraph (2)(a) above as having, for tie purposes of paragraph 1 of this Schedule, disposed of deep discount securities which are converted into, or exchanged for, other deep discount securities—

(a) he shall not be so treated—

(i) if the date which is the redemption date in relation to the new securities is not later than the date which was the redemption date in relation to the converted or exchanged securities ; and

(ii) no consideration is given for the conversion or exchange other than the new securities ; but

(b) the amount of the accrued income attributable to his period of ownership of the converted or exchanged securities (including any amount added by virtue of the previous operation of this paragraph) shall be added to the amount of the accrued income attributable to his period of ownership of the new securities.

Disposals on a no-gain J no-loss basis

9 Where a disposal of a deep discount security is to be treated for the purposes of capital gains tax as one on which neither a gain nor a loss accrues to the person making the disposal, the consideration for which the person acquiring the security would, apart from this paragraph, be treated for the purposes of capital gains tax as having acquired the security shall be increased by the amount mentioned in paragraph 1(1)(a) of this Schedule.

Time of disposal and acquisition where securities disposed of under contract

10 (1) Where any deep discount security is disposed of and acquired under a contract, the time at which the disposal and acquisition is made is the time at which the contract is made (and not, if different, the time at which the security is transferred).

(2) If the contract is conditional (and in particular if it is conditional on the exercise of an option) the time at which the disposal and acquisition is made is the time when the condition is satisfied.

Identification of securities disposed of

11 (1) The rules contained in sections 88 and 89 of the [1982 c. 39.] Finance Act 1982 (identification, for the purposes of capital gains tax, of securities disposed of) shall apply for the purposes of this Schedule as they apply for the purposes of capital gains tax.

(2) In paragraph 1(2) of Schedule 6 to the [1983 c. 28.] Finance Act 1983 (exclusion of certain securities from provisions relating to election for pooling for purposes of capital gains tax), there shall be added, after paragraph (a)— “; nor

(aa) deep discount securities (within the meaning of section 36 of the Finance Act 1984)”.

Exemption for charities

12 Section 360(2) of the Taxes Act (exemption for charities from tax on chargeable gains) shall apply in relation to tax chargeable by virtue of paragraph 1 above as it applies in relation to tax on chargeable gains.

Consequential amendments

13 In section 254 of the Taxes Act (1osses and charges etc. for which claim to set-off against surplus of franked investment income may be made), the words " or paragraph 3 of Schedule 9 to the Finance Act 1984 " shall be inserted—

(a) at the end of paragraph (b) in subsection (2); and

(b) after the words " 248 of this Act " in subsection (7)(b).

14 In Schedule 10 to the [1975 c. 7.] Finance Act 1975 (capital transfer tax: valuation) in paragraph 9 (value transferred on death) at the end of sub-paragraph (1) there shall be added the words “and

(f) allowance shall be made for any liability to income tax arising under paragraph 1 of Schedule 9 to the Finance Act 1984 (deep discount securities) on a disposal which is deemed to occur by virtue of paragraph 2(2) of that Schedule.”

Section 38(1).

SCHEDULE 10 APPROVED SHARE OPTION SCHEMES

Approval of schemes

1 (1) On the application of a body corporate (in this Schedule referred to as " the grantor ") which has established a share option scheme, the Board shall approve the scheme if they are satisfied that it fulfils the requirements of this Schedule; but shall not approve it if it appears to them that there are features of the scheme which are neither essential nor reasonably incidental to the purpose of providing for employees and directors benefits in the nature of rights to acquire shares.

(2) An application under sub-paragraph (1) above shall be made in writing and contain such particulars and be supported by such evidence as the Board may require.

(3) Where the grantor has control of another company or companies, the scheme may be expressed to extend to all or any of the companies of which it has control and in this Schedule a scheme which is expressed so to extend is referred to as a " group scheme ".

(4) In relation to a group scheme the expression "participating company" means the grantor or any other company to which for the time being the scheme is expressed to extend.

(5) Where the provisions of a scheme are approved in pursuance of an application made under this paragraph before 1st January 1985, section 38 of this Act shall apply in relation to any right obtained before 1st July 1985 as if the scheme containing those provisions had always been approved.

2 (1) If, at any time after the Board have approved a scheme, any of the requirements of this Schedule cease to be satisfied or the grantor fails to provide information requested by the Board under paragraph 14 below, the Board may withdraw the approval with effect from that time or such later time as the Board may specify.

(2) If an alteration is made in the scheme at any time after the Board have approved the scheme, the approval shall not have effect after the date of the alteration unless the Board have approved the alteration.

3 If the grantor is aggrieved by—

(a) the failure of the Board to approve the scheme or to approve an alteration in the scheme ; or

(b) the withdrawal of approval;

it may, by notice in writing given to the Board within thirty days from the date on which it is notified of the Board's decision, require the matter to be determined by the Special Commissioners, and the Special Commissioners shall hear and determine the matter in like manner as an appeal.

Eligibility

4 (1) The scheme must not provide for any person to be eligible to participate in it, that is to say to obtain and exercise rights under it—

(a) unless he is a full-time director or qualifying employee of the grantor or, in the case of a group scheme, of a participating company;

(b) at any time when he has, or has within the preceding twelve months had, a material interest in a close company within the meaning of Chapter III of Part XI of the Taxes Act, which is—

(i) a company the shares of which may be acquired pursuant to the exercise of rights obtained under the scheme; or

(ii) a company which has control of such a company or is a member of a consortium which owns such, a company.

(2) Notwithstanding sub-paragraph (1)(a) above, the scheme may provide that a person may exercise rights obtained under it despite having ceased to be a full-time director or qualifying employee.

(3) In determining whether a company is a close company for the purposes of sub-paragraph (1) above, section 282(1)(a) of the Taxes Act (exclusion of companies not resident in United Kingdom) and section 283 of that Act (exclusion of certain companies with quoted shares) shall be disregarded.

(4) In determining for the purposes of this paragraph whether a person has or has had a material interest in a company, subsection (6) of section 285 of the Taxes Act (interest paid to directors and directors' associates) and paragraph (ii) of the proviso to section 303 (3) of that Act (meaning of " associate ") shall have effect with the substitution for the references in those provisions to 5 per cent, of references to 10 per cent.

Limitation of rights

5 (1) The scheme must provide that no person shall obtain rights under it which would, at the time they are obtained, cause the aggregate market value of the shares which he may acquire in pursuance of rights obtained under the scheme or under any other scheme approved under this Schedule and established by the grantor or by any associated company of the grantor (and not exercised) to exceed or further exceed the appropriate limit.

(2) The appropriate limit is the greater of—

(a) £100,000; or

(b) four times the amount of the relevant emoluments for the current or preceding year of assessment (whichever of those years gives the greater amount).

(3) Where there were no relevant emoluments for the preceding year of assessment, sub-paragraph (2) above shall apply with the following paragraph substituted for paragraph (b)—

“(b) four times the amount of the relevant emoluments for the period of twelve months beginning with the first day during the current year of assessment in respect of which there are relevant emoluments”.

(4) For the purposes of sub-paragraph (1) above, the market value of shares shall be calculated as at the time when the rights in relation to those shares were obtained or, in a case where an agreement relating to them has been made under paragraph 13 below, such earlier time or times as may be provided in the agreement.

(5) For the purposes of sub-paragraph (2) above the relevant emoluments are such of the emoluments of the office or employment by virtue of which the person in question is eligible to participate in the scheme as are liable to be paid under deduction of tax pursuant to section 204 of the Taxes Act (pay-as-you-earn), after deducting from them amounts included by virtue of Chapter II of Part III of the [1976 c. 40.] Finance Act 1976.

Scheme shares

6 The scheme must provide for directors and employees to obtain rights to acquire shares (in this Schedule referred to as "scheme shares") which satisfy the requirements of paragraphs 7 to 11 below.

7 Scheme shares must form part of the ordinary share capital of—

(a) the grantor ; or

(b) a company which has control of the grantor ; or

(c) a company which either is, or has control of, a company which—

(i) is a member of a consortium owning either the grantor or a company having control of the grantor; and

(ii) beneficially owns not less than three twentieths of the ordinary share capital of the company so owned.

8 Scheme shares must be—

(a) shares of a class quoted on a recognised stock exchange ; or

(b) shares in a company which is not under the control of another company ; or

(c) shares in a company which is under the control of a company (other than a company which is, or would if resident in the United Kingdom be, a close company within the meaning of section 282 of the Taxes Act) whose shares are quoted on a recognised stock exchange.

9 Scheme shares must be—

(a) fully paid up;

(b) not redeemable ; and

(c) not subject to any restrictions other than restrictions which attach to all shares of the same class.

10 (1) In determining for the purposes of paragraph 9(c) above whether scheme shares which are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or of any interest in them or of the proceeds of their sale or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantage to him or to a person connected with him.

(2) Sub-paragraph (1) above does not apply to so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Rules set out in the Model Code for Securities Transactions by Directors of Listed Companies issued by the Stock Exchange in April 1981.

11 Except where scheme shares are in a company whose ordinary share capital consists of shares of one class only, the majority of the issued shares of the same class must be held by persons other than—

(a) persons Who acquired their shares in pursuance of a right conferred on them or an opportunity afforded to them as a director or employee of the grantor or any other company and not in pursuance of an offer to the public ;

(b) trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in paragraph (a) above; and

(c) in a case where the shares fall within sub-paragraph (c) and do not fall within sub-paragraph (a) of paragraph 8 above, companies which have control of the company whose shares are in question or of which that company is an associated company.

Transfer of rights

12 (1) The scheme must not permit any person obtaining rights under it to transfer any of them but may provide that if such a person dies before exercising them, they may be exercised after, but not later than one year after, the date of his death.

(2) Where the scheme contains the provision permitted by sub-paragraph (1) above and any rights are exercised—

(a) after the death of the person who obtained them ; but

(b) before the expiry of the period of ten years beginning with his obtaining them ;

subsection (3) of section 38 of this Act shall apply with the omission of the reference to the conditions mentioned in subsection (4).

Share price

13 The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme must be stated at the time the right is obtained and must not be manifestly less than the market value of shares of the same class at that time or, if the Board and the grantor agree in writing, at such earlier time or tunes as may be provided in the agreement, but the scheme may provide for such variation of the price so stated as may be necessary to take account of any variation in the share capital of which the scheme shares form part.

Information

14 The Board may by notice in writing require any person to furnish them, within such time as the Board may direct (not being less than thirty days), with such information as the Board think necessary for the performance of their functions under this Schedule, and as the person to whom the notice is addressed has or can reasonably obtain, including in particular information—

(a) to enable the Board to determine—

(i) whether to approve a scheme or withdraw an approval already given; or

(ii) the liability to tax, including capital gains tax, of any person who has participated in a scheme ; and

(b) in relation to the administration of a scheme and any alteration of the terms of a scheme.

Interpretation

15 (1) In this Schedule—

• " associated company " has the same meaning as in section 302 of the Taxes Act;

• " control" has the same meaning as in section 534 of the Taxes Act;

• " grantor " has the meaning given by paragraph 1(1) ;

• " group scheme" and, in relation to such a scheme, " participating company" have the meanings given by paragraph 1;

• " market value " has the same meaning as in Part VIII of the [1979 c. 14.] Capital Gains Tax Act 1979 ;

• " qualifying employee" in relation to a company, means an employee of the company (other than one who is a director of the company or, in the case of a group scheme, of a participating company) who is required, under the terms of his employment, to work for the company for at least twenty hours a week;

• " scheme shares " has the meaning given by paragraph 6 ; and

• " shares " includes stock.

(2) Section 303(3) of the Taxes Act (meaning of "associate") shall have effect in a case where the scheme is a group scheme, with the substitution of a reference to all the participating companies for the first reference to the company in paragraph (ii) of the proviso to that subsection.

(3) Section 533 of the Taxes Act (connected persons) shall apply for the purposes of this Schedule.

(4) For the purposes of this Schedule a company is a member of a consortium owning another company if it is one of a number of companies which between them beneficially own not less than three-quarters of the other company's ordinary share capital and each of which beneficially owns not less than one-twentieth of that capital.

Section 50(1).

SCHEDULE 11 FURNISHED HOLIDAY LETTINGS

Treatment of lettings as a trade for certain purposes

1 (1) Subject to the provisions of this Schedule, for the purposes of the provisions mentioned in sub-paragraph (2) below—

(a) the commercial letting of furnished holiday accommodation in respect of which the profits or gains are chargeable under Case VI of Schedule D shall be treated as a trade; and

(b) all such lettings made by a particular person or partnership or body of persons shall be treated as one trade.

(2) The provisions mentioned in sub-paragraph (1) above are—

(a) section 4(2) of the Taxes Act (payment of income tax in two equal instalments);

(b) sections 168 to 175 and 177 to 178 of the Taxes Act and section 30 of the [1978 c. 42.] Finance Act 1978 (relief for losses) ;

(c) subsection (9)(c) of section 226 of the Taxes Act (retirement annuity contracts);

(d) subsection (1)(c) of section 530 of that Act (earned income) ;

(e) Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 (capital allowances) ;

(f) sections 115 to 120 of the [1979 c. 14.] Capital Gains Tax Act 1979 (roll over relief for replacement of business assets) ;

(g) section 124 of that Act (transfer of business on retirement) ;

(h) section 126 of that Act (relief for gifts of business assets);

(i) section 136 of that Act (relief in respect of loans to traders) ; and

(j) section 39 of the [1980 c. 48.] Finance Act 1980 (relief for pre-trading expenditure).

Losses and pre-trading expenditure

2 (1) In their application by virtue of paragraph 1 above section 175(1) of the Taxes Act (treatment of interest as a loss for purposes of carry-forward and carry-back) and section 39(1) of the Finance Act 1980 shall have effect as if for the references in those sections to Case I of Schedule D there were substituted references to Case VI of that Schedule.

(2) No relief shall be given to an individual under section 30 of the [1978 c. 42.] Finance Act 1978, as it applies by virtue of paragraph 1 above, in respect of a loss sustained in any year of assessment, if any of the accommodation in respect of which the trade is carried on in that year was first let by him as furnished accommodation more than three years before the beginning of that year of assessment.

(3) Relief shall not be given for the same loss or the same portion of a loss both under any of the provisions mentioned in paragraph 1(2)(b) above, as they apply by virtue of this Schedule, and under any other provision of the Tax Acts.

Expenditure

3 In computing the profits or gains arising from the commercial letting of furnished holiday accommodation which are chargeable to tax under Case VI of Schedule D, such expenditure may be deducted as would be deductible if the letting were a trade and those profits or gains were accordingly to be computed in accordance with the rules applicable to Case I of that Schedule.

Capital gains tax

4 (1) Subject to sub-paragraph (2) below, for the purposes of the provisions mentioned in sub-paragraph (2)(f) to (i) of paragraph 1 above as they apply by virtue of that paragraph, where in any year of assessment a person makes a commercial letting of furnished holiday accommodation—

(a) the accommodation shall be taken to be used in that year only for the purposes of the trade of making such lettings ; and

(b) that trade shall be taken to be carried on throughout that year.

(2) Sub-paragraph (1) above does not apply to any period in a year of assessment during which the accommodation is neither let commercially nor available to be so let unless it is prevented from being so let or available by any works of construction or repair.

5 Where—

(a) a gain to which section 101 of the [1979 c. 14.] Capital Gains Tax Act 1979 (relief on disposal of private residence) applies accrues to any individual on the disposal of an asset; and

(b) by virtue of paragraph 1 above the amount or value of the consideration for the acquisition of the asset is treated as reduced under section 115 or 116 of that Act,

the gain to which section 101 applies shall be reduced by the amount of the reduction mentioned in paragraph (b) above.

Power to make apportionments

6 Where there is a letting of accommodation only part of which is holiday accommodation such apportionments shall be made for the purposes of this Schedule as appear to the inspector, or on appeal the Commissioners, to be just and reasonable.

Adjustments of tax charged

7 Where a person has been charged to income tax, corporation tax or capital gains tax otherwise than in accordance with the provisions of this Schedule, such assessment, reduction or discharge of an assessment or, where a claim for repayment is made, such repayment, shall be made as may be necessary to give effect to those provisions.

Section 58.

SCHEDULE 12 INITIAL AL10WANCES AND FIRST-YEAR AL10WANCES

PART I Withdrawal of Allowances

Initial allowances for industrial buildings and structures

1 (1) In section 1(2) of the [1968 c. 3.] Capital Allowances Act 1968 (rate of initial allowances for capital expenditure on the construction of industrial buildings or structures) for the words " three-quarters" there shall be substituted,—

(a) with respect to capital expenditure incurred after 13th March 1984 and before 1st April 1985, the words " one half" ; and

(b) with respect to capital expenditure incurred on or after 1st April 1985 and before 1st April 1986, the words "one quarter " ;

and no initial allowance shall be made in respect of expenditure incurred on or after 1st April 1986.

(2) Nothing in sub-paragraph (1) above applies to capital expenditure which—

(a) is incurred after 13th March 1984 and before 1st April 1987 ; and

(b) consists of the payment of sums under a contract entered into on or before 13th March 1984 by the person incurring the expenditure.

(3) Sub-paragraphs (1) and (2) above shall be construed as if they were contained in Part I of the [1968 c. 3.] Capital Allowances Act 1968 except that—

(a) expenditure shall not be treated for the purposes of those sub-paragraphs as having been incurred after the date on which it was in fact incurred by reason only of section 1(6) of that Act (expenditure incurred before a trade begins); and

(b) expenditure falling within subsection (1)(b) of section 5 of that Act (purchase price of building or structure bought unused) shall be treated for the purposes of those sub-paragraphs as having been incurred at the latest time when any expenditure falling within subsection (1)(a) of that section (expenditure on the construction of the building or structure) was incurred.

First-year allowances for machinery and plant

2 (1) In section 42(1) of the [1971 c. 68.] Finance Act 1971 (rate of first-year allowance for capital expenditure incurred on provision of machinery or plant) for the words " the whole " there shall be substituted,—

(a) with respect to capital expenditure incurred after 13th March 1984 and before 1st April 1985, the words "three-quarters" ; and

(b) with respect to capital expenditure incurred on or after 1st April 1985 and before 1st April 1986, the words "one half " ;

and no first-year allowance shall be made in respect of expenditure incurred on or after 1st April 1986.

(2) Nothing in sub-paragraph (1) above applies to capital expenditure which—

(a) is incurred after 13th March 1984 and before 1st April 1987 ; and

(b) consists of the payment of sums under a contract entered into on or before 13th March 1984 by the person incurring the expenditure or by a person whose contractual obligations that person has assumed with a view to entering into leasing arrangements.

(3) For the purposes of sub-paragraph (2)(b) above, a person incurring expenditure on the provision of machinery or plant (in this sub-paragraph referred to as " the lessor ") shall be taken to have assumed, with a view to entering into leasing arrangements, the contractual obligations of a person who entered into a contract for the provision of that machinery or plant (in this sub-paragraph referred to as " the lessee ") if, and only if,—

(a) arrangements exist under which the lessor will lease the machinery or plant to the lessee ; and

(b) the obligations of the lessee under the contract either have been taken over by the lessor or have been discharged on the lessor's entering into a new contract for the provision of the machinery or plant concerned ;

and, where there is such a new contract as is referred to in paragraph (b) above, sums paid under that contract shall be treated for the purposes of sub-paragraph (2)(b) above and Part II of this Schedule as paid under the contract referred to in that sub-paragraph.

(4) Sub-paragraphs (1) to (3) above shall be construed as if they were contained in Chapter I of Part III of the [1971 c. 68.] Finance Act 1971, except that expenditure shall not be treated for the purposes of those sub-paragraphs as having been incurred after the date on which it was in fact incurred by reason only of so much of section 50(4) of that Act as relates to expenditure incurred before a trade begins.

Initial allowances in respect of dwelling-houses let on assured tenancies

3 (1) In paragraph 1(2) of Schedule 12 to the [1982 c. 39.] Finance Act 1982 (rate of initial allowance in respect of qualifying dwelling-house on the construction of which capital expenditure is incurred) for the words " three-quarters " there shall be substituted,—

(a) with respect to capital expenditure incurred after 13th March 1984 and before 1st April 1985, the words " one half " ; and

(b) with respect to capital expenditure incurred on or after 1st April 1985 and before 1st April 1986, the words " one quarter " ;

and no initial allowance shall be made in respect of expenditure incurred on or after 1st April 1986.

(2) Nothing in sub-paragraph (1) above applies to capital expenditure which—

(a) is incurred after 13th March 1984 and before 1st April 1987 ; and

(b) consists of the payment of sums under a contract entered into on or before 13th March 1984 by the person incurring the expenditure.

(3) Sub-paragraphs (1) and (2) above shall be construed as if they were contained in Schedule 12 to the Finance Act 1982 except that expenditure falling within sub-paragraph (1)(b) of paragraph 8 of that Schedule (purchase price of building bought unused) shall be treated for the purposes of those sub-paragraphs as having been incurred at the latest time when any expenditure falling within sub-paragraph (1)(a) of that paragraph (expenditure on the construction of the building) was incurred.

PART II Supplementary

Transitional relief for regional projects

4 (1) The provisions of Part I of this Schedule do not apply to so much of any expenditure as is certified by the Secretary of State for the purposes of this paragraph to be expenditure which, in his opinion, qualifies for a regional development grant or a grant under Part IV of the relevant Order and consists of the payment of sums on a project—

(a) either in an area which on 13th March 1984 was a development area, within the meaning of the [1982 c. 52.] Industrial Development Act 1982, or in Northern Ireland ; and

(b) in respect of which a written offer of financial assistance under section 7 or section 8 of that Act was made on behalf of the Secretary of State in the period beginning on 1st April 1980 and ending on 13th March 1984 or in respect of which a written offer of financial assistance was made in that period by the Highlands and Islands Development Board.

(2) The provisions of Part I of this Schedule do not apply to so much of any expenditure as is certified by the Department of Economic Development in Northern Ireland for the purposes of this paragraph to be expenditure which, in the opinion of that Department, qualifies for a grant under Part IV of the relevant Order and consists of the payment of sums on a project—

(a) in Northern Ireland ; and

(b) in respect of which a written offer of financial assistance under Article 7 or Article 8 of the relevant Order was made on behalf of a Department of the Government of Northern Ireland in the period beginning on 1st April 1980 and ending on 13th March 1984 or in respect of which a written offer of financial assistance was made in that period by the Local Enterprise Development Unit.

(3) In this paragraph—

• "regional development grant" means a grant under Part II of the Industrial Development Act 1982 ;

• " the relevant Order" means the [S.I. 1982/1083 (N.I. 15).] Industrial Development (Northern Ireland) Order 1982 ; and any reference to a particular provision of that Act or Order includes a reference to the corresponding provision of any Act or Order which was in force before and repealed by the said Act or Order of 1982.

Spreading of expenditure under certain contracts

5 (1) Where in circumstances falling within paragraph 8 below a person incurs such capital expenditure as is referred to in section 1 of the [1968 c. 3.] Capital Allowances Act 1968 under a contract—

(a) which is entered into after 13th March 1984 and on or before 31st March 1986, and

(b) which either specifies no date on or by which the contractual obligations must be fully performed or specifies such a date which is after 31st March 1985,

Chapter I of Part I of that Act shall have effect in relation to the capital expenditure so incurred subject to the following provisions of this paragraph.

(2) In this Part of this Schedule, in relation to a contract falling within sub-paragraph (1) above,—

• " the contract date " means the date on which the contract is entered into;

• " the contract price " means the total capital expenditure on the construction of the building or structure concerned which the person referred to in sub-paragraph (1) above is to incur pursuant to the contract;

• " the completion date " means the date specified as mentioned in sub-paragraph (1)(b) above or, if no date is so specified, 31st March 1987 ; and

• " the maximum allowable expenditure " shall be construed in accordance with paragraph 9 below.

(3) In respect of capital expenditure incurred in either of the financial years 1984 and 1985 under a contract falling within sub-paragraph (1) above, the initial allowance under section 1 of the [1968 c. 3.] Capital Allowances Act 1968 shall not exceed the fraction appropriate under paragraph 1 above of the maximum allowable expenditure for that year.

(4) So much (if any) of the capital expenditure incurred in the financial year 1984 under a contract falling within sub-paragraph (1) above as exceeds the maximum allowable expenditure for that year shall be deemed for all purposes of Chapter I of Part I of the Capital Allowances Act 1968 to be incurred on 1st April 1985.

(5) So much (if any) of the aggregate of—

(a) the capital expenditure incurred in the financial year 1985 under a contract falling within sub-paragraph (1) above, and

(b) any excess relating to that contract which, by virtue of sub-paragraph (4) above, is deemed to be incurred in that financial year,

as exceeds the maximum allowable expenditure for that financial year shall be deemed for all purposes of Chapter I of Part I of the Capital Allowances Act 1968 to be incurred on 1st April 1986.

(6) This paragraph shall be construed as if it were contained in Chapter I of Part I of the Capital Allowances Act 1968 except that—

(a) expenditure shall not be treated for the purposes of this paragraph as having been incurred after the date on which it was in fact incurred by reason only of section 1(6) of that Act; and

(b) expenditure falling within subsection (1)(b) of section 5 of that Act shall be treated for the purposes of this paragraph as having been incurred at the latest time when any expenditure falling within subsection (1)(a) of that section was incurred.

6 (1) Where in circumstances falling within paragraph 8 below a person carrying on a trade incurs capital expenditure on the provision of machinery or plant for the purposes of that trade under a contract—

(a) which is entered into after 13th March 1984 and on or before 31st March 1986, and

(b) which provides that he shall or may become the owner of the machinery or plant on or before the performance of the contract, and

(c) which either specifies no date on or by which the contractual obligations must be fully performed or specifies such a date which is after 31st March 1985,

Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 shall have effect in relation to the capital expenditure so incurred subject to the following provisions of this paragraph.

(2) In this Part of this Schedule, in relation to a contract falling within sub-paragraph (1) above,—

• " the contract date " means the date on which the contract is entered into ;

• " the contract price " means the total capital expenditure on the provision of the machinery or plant which the person referred to in sub-paragraph (1) above is to incur pursuant to the contract;

• " the completion date " means the date specified as mentioned in sub-paragraph (1)(c) above or, if no date is so specified, 31st March 1987 ; and

• " the maximum allowable expenditure " shall be construed in accordance with paragraph 9 below.

(3) The provisions of this paragraph do not apply in relation to capital expenditure to which section 45(1)(b) of the Finance Act 1971 (machinery and plant on hire-purchase etc.) applies.

(4) In respect of capital expenditure incurred in either of the financial years 1984 and 1985 under a contract falling within sub-paragraph (1) above, the first-year allowance under section 42(1) of the Finance Act 1971 shall not exceed the fraction appropriate under paragraph 2 above of the maximum allowable expenditure for that year.

(5) So much (if any) of the capital expenditure incurred in the financial year 1984 under a contract falling within sub-paragraph (1) above as exceeds the maximum allowable expenditure for that year shall be deemed for all purposes of Chapter I of Part III of the Finance Act 1971 to be incurred on 1st April 1985.

(6) So much (if any) of the aggregate of—

(a) the capital expenditure incurred in the financial year 1985 under a contract falling within sub-paragraph (1) above, and

(b) any excess relating to that contract which, by virtue of sub-paragraph (5) above, is deemed to be incurred in that financial year,

as exceeds the maximum allowable expenditure for that financial year shall be deemed for all purposes of Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 to be incurred on 1st April 1986.

(7) This paragraph shall be construed as if it were contained in Chapter I of Part III of the Finance Act 1971 except that expenditure shall not be treated for the purposes of this paragraph as having been incurred after the date on which it was in fact incurred by reason only of so much of section 50(4) of that Act as relates to expenditure incurred before a trade began.

7 (1) Where in circumstances falling within paragraph 8 below an approved body incurs such capital expenditure as is referred to in paragraph 1(1) of Schedule 12 to the [1982 c. 39.] Finance Act 1982 under a contract—

(a) which is entered into after 13th March 1984 and on or before 31st March 1986, and

(b) which either specifies no date on or by which the contractual obligations must be fully performed or specifies such a date which is after 31st March 1985,

that Schedule shall have effect in relation to the capital expenditure so incurred subject to the following provisions of this paragraph.

(2) In this Part of this Schedule, in relation to a contract falling within sub-paragraph (1) above,—

• " the contract date " means the date on which the contract was entered into;

• " the contract price " means the total capital expenditure on the construction of the building concerned which die approved body referred to hi sub-paragraph (1) above is to incur pursuant to the contract;

• " the completion date " means the date specified as mentioned in sub-paragraph (1)(b) above or, if no date is so specified, 31st March 1987 ; and

• " the maximum allowable expenditure " shall be construed in accordance with paragraph 9 below.

(3) In respect of capital expenditure incurred in either of the financial years 1984 and 1985 under a contract falling within sub-paragraph (1) above, the initial allowance under paragraph 1 of Schedule 12 to the Finance Act 1982 shall not exceed the fraction appropriate under paragraph 3 above of the maximum allowable expenditure for that year.

(4) So much (if any) of the capital expenditure incurred in the financial year 1984 under a contract falling within sub-paragraph (1) above as exceeds the maximum allowable expenditure for that year shall be deemed for all purposes of Schedule 12 to the Finance Act 1982 to be incurred on 1st April 1985.

(5) So much (if any) of the aggregate of—

(a) the capital expenditure incurred in the financial year 1985 under a contract falling within sub-paragraph (1) above, and

(b) any excess relating to that contract which, by virtue of sub-paragraph (4) above, is deemed to be incurred in that financial year,

as exceeds the maximum allowable expenditure for that financial year shall be deemed for all purposes of Schedule 12 to the [1982 c. 39.] Finance Act 1982 to be incurred on 1st April 1986.

(6) This paragraph shall be construed as if it were contained in Schedule 12 to the Finance Act 1982 except that expenditure falling within sub-paragraph (1)(b) of paragraph 8 of that Schedule shall foe treated for the purposes of this paragraph as having been incurred at the latest time when any expenditure falling within sub-paragraph (1)(a) of that paragraph was incurred.

8 (1) The circumstances referred to in sub-paragraph (1) of each of paragraphs 5 to 7 above is that the sole or main benefit which (apart from this Part of this Schedule) might have been expected to be gained by incurring the expenditure at the time at which it was incurred was either—

(a) the securing of an initial allowance or first-year allowance in respect of the expenditure, rather than a writing-down allowance ; or

(b) the securing of a higher rate of initial or first-year allowance in respect of the expenditure.

(2) In sub-paragraph (1) above—

• " initial allowance " means an initial allowance under section 1 of the [1968 c. 3.] Capital Allowances Act 1968 or Schedule 12 to the Finance Act 1982 ; and

• " first-year allowance " means a first-year allowance under section 41 of the [1971 c. 68.] Finance Act 1971.

9 (1) References in paragraphs 5 to 7 above to the maximum allowable expenditure for each of the financial years 1984 and 1985 shall be construed in accordance with this paragraph.

(2) For each contract falling within sub-paragraph (1) of any of paragraphs 5 to 7 above, the maximum allowable expenditure shall be that fraction of the contract price of which—

(a) the numerator,—

(i) for the financial year 1984, is the number of complete months in the period beginning on the contract date and ending on 31st March 1985 ; and

(ii) for the financial year 1985, is 12 or, if it is less, the number of complete months in the period beginning on the contract date and ending on 31st March 1986; and

(b) the denominator is the number of complete months in the period beginning on the contract date and ending on the completion date or, if it is earlier, 31st March 1987.

10 (1) Where, by virtue of paragraph 5(4), paragraph 6(5) or paragraph 7(4) above, a portion of any expenditure which is incurred by any person in the financial year 1984 is deemed to be incurred on 1st April 1985, so much of that expenditure as is not deemed to be incurred on that date shall be apportioned to the chargeable periods or their basis periods which begin or end in the financial year 1984 on a time basis according to the respective lengths of those periods which fall within that financial year.

(2) Where, by virtue of paragraph 5(5), paragraph 6(6) or paragraph 7(5) above, a portion of the aggregate of any capital expenditure incurred and deemed to be incurred by any person in the financial year 1985 is deemed to be incurred on 1st April 1986, so much of that aggregate expenditure as is not deemed to be incurred on that date shall be apportioned to the chargeable periods or their basis periods which begin or end in the financial year 1985 on the like time basis as is specified in sub-paragraph (1) above.

Section 64.

SCHEDULE 13 QUALIFYING CORPORATE BONDS

PART I Application of Provisions Relating to Gilt-Edged Securities

[1979 c. 14.] Capital Gains Tax Act 1979

1 In section 64 of the Capital Gains Tax Act 1979 (interpretation provisions relating to shares and securities) after the definition of " gilt-edged securities " there shall be inserted—

• “' qualifying corporate bonds' has the meaning given by section 64 of the Finance Act 1984”.

2 In section 67(1) of that Act after the words " gilt-edged securities " there shall be added the words " or qualifying corporate bonds ".

3 (1) In section 70 of that Act, in subsection (1) after the words " gilt-edged securities " there shall be inserted the words " or, subject to subsection (1A) below, qualifying corporate bonds ".

(2) After subsection (1) of that section there shall be inserted the following subsection:—

“(1A) This section does not apply in relation to a disposal of qualifying corporate bonds if the disposal is such that section 58 of the [1975 c. 45.] Finance (No. 2) Act 1975 applies but, subject to that, any reference in the following provisions of this section to gilt-edged securities includes a reference to qualifying corporate bonds.”

Other enactments

4 In section 270(3) of the Taxes Act (groups of companies: gilt-edged securities) after the words " specified securities " there shall be inserted the words " or qualifying corporate bonds as defined in section 64 of the Finance Act 1984 ".

5 In Schedule 16 to the [1973 c. 51.] Finance Act 1973 (underwriters) at the end of paragraph 7 (exclusion of gilt-edged securities) there shall be added the words " or of qualifying corporate bonds as defined in section 64 of the Finance Act 1984 ".

6 In Schedule 6 to the [1983 c. 28.] Finance Act 1983 (election for pooling) in paragraph 1(2) (definition of qualifying securities) after paragraph (a) there shall be inserted—

“(aa) qualifying corporate bonds, as defined in section 64 of the Finance Act 1984 ; nor”.

PART II Reorganisations, Conversions, Reconstructions etc.

7 (1) In this Part of this Schedule " relevant transaction " means a reorganisation, conversion of securities or other transaction such as is mentioned in subsection (7) of section 64 of this Act.

(2) Where the qualifying corporate bond referred to in paragraph (b) of that subsection would constitute the original shares for the purposes of sections 78 to 81 of the principal Act, it is in this Part of this Schedule referred to as " the old asset" and the shares or securities which would constitute the new holding for those purposes are referred to as " the new asset ".

(3) Where the qualifying corporate bond referred to in section 64(7)(b) of this Act would constitute the new holding for the purposes of sections 78 to 81 of the principal Act, it is in this Part of this Schedule referred to as " the new asset" and the shares or securities which would constitute the original shares for those purposes are referred to as " the old asset ".

(4) In this Part of this Schedule " the principal Act" means the [1979 c. 14.] Capital Gains Tax Act 1979.

8 (1) So far as the relevant transaction relates to the old asset and the new asset, sections 78 to 81 of the principal Act shall not apply in relation to it.

(2) In accordance with sub-paragraph (1) above, the new asset shall not be treated as having been acquired on any date other than the date of the relevant transaction or, subject to sub-paragraphs (3) and (4) below, for any consideration other than the market value of the old asset as determined immediately before that transaction.

(3) If, on the relevant transaction, the person concerned receives, or becomes entitled to receive, any sum of money which, in addition to the new asset, is by way of consideration for the old asset, that sum shall be deducted from the consideration referred to in sub-paragraph (2) above.

(4) If, on the relevant transaction, the person concerned gives any sum of money which, in addition to the old asset, is by way of consideration for the new asset, that sum shall be added to the consideration referred to in sub-paragraph (2) above.

9 In any case where—

(a) the old asset consists of a qualifying corporate bond, and

(b) the relevant transaction takes place at such a time that, if there were then a disposal of the old asset, it would be a disposal within section 67 of the principal Act,

then, so far as it relates to the old asset and the new asset, the relevant transaction shall be treated for the purposes of that Act as a disposal of the old asset and an acquisition of the new asset.

10 (1) Except in a case falling within paragraph 9 above, so far as it relates to the old asset and the new asset, the relevant transaction shall be treated for the purposes of the principal Act as not involving any disposal of the old asset but—

(a) there shall be calculated the chargeable gain or allowable loss that would have accrued if, at the time of the relevant transaction, the old asset had been disposed of for a consideration equal to its market value immediately before that transaction; and

(b) subject to paragraph 11 below, the whole or a corresponding part of the chargeable gain or allowable loss mentioned in paragraph (a) above shall be deemed to accrue on a subsequent disposal of the whole or part of the new asset (in addition to any gain or loss that actually accrues on that disposal); and

(c) if that subsequent disposal is within section 67 of the principal Act, that section shall have effect only in relation to any gain or loss that actually accrues and not in relation to any gain or loss which is deemed to accrue by virtue of paragraph (b) above.

(2) Paragraphs (b) and (c) of sub-paragraph (1) above shall not apply to any disposal falling within the provisions of—

(a) section 44(1) of the principal Act (disposals between husband and wife); or

(b) section 49(4) of that Act (disposals by personal representatives to legatees); or

(c) section 273(1) of the Taxes Act (disposals within a group of companies);

but a person who has acquired the new asset on a disposal falling within those provisions (and without there having been a previous disposal falling within those provisions or a devolution on death) shall be treated for the purposes of paragraphs (b) and (c) of sub-paragraph (1) above as if the new asset had been acquired by him at the same time and for the same consideration as, having regard to paragraph 8 above, it was acquired by the person making the disposal.

11 (1) In any case where—

(a) on the calculation under paragraph 10(1)(a) above, a chargeable gain would have accrued, and

(b) the consideration for the old asset includes such a sum of money as is referred to in paragraph 8(3) above,

then, subject to sub-paragraph (2) below, the proportion of that chargeable gain which that sum of money bears to the market value of the old asset immediately before the relevant transaction shall be deemed to accrue at the time of that transaction.

(2) If the inspector is satisfied that the sum of money referred to in sub-paragraph (1)(b) above is small, as compared with the market value of the old asset immediately before the relevant transaction, and so directs, sub-paragraph (1) above shall not apply.

(3) In a case where sub-paragraph (1) above applies, the chargeable gain which, apart from this paragraph, would by virtue of paragraph 10(1)(b) above be deemed to accrue on a subsequent disposal of the whole or part of the new asset shall be reduced or, as the case may be, extinguished by deducting therefrom the amount of the chargeable gain which, by virtue of sub-paragraph (1) above, is deemed to accrue at the time of the relevant transaction.

Section 70.

SCHEDULE 14 BENEFICIARY'S LIABILITY FOR TAX ON GAINS OF NON-RESIDENT TRUSTEES

Interpretation

1 (1) In this Schedule—

• "attributed gain", in relation to the beneficiary, means the chargeable gain which, as mentioned in paragraph (b) of subsection (1) of the principal section, is treated as accruing to him;

• "the beneficiary" means the beneficiary referred to in that paragraph and paragraph (c) of that subsection ;

• " claim " means a claim under paragraph 2(1) below ;

• " close relative ", in relation to any person, means his spouse or a child or remoter descendant of his ;

• "ineligible gain" shall be construed in accordance with paragraph 2(3) below;

• " offshore income gain " has the same meaning as in Chapter VII of Part II of this Act;

• " the principal Act" means the [1979 c. 14.] Capital Gains Tax Act 1979 ;

• " the principal section " means section 70 of this Act;

• " related settlement" shall be construed in accordance with paragraph 5(6) below;

• " relevant benefit" shall be construed in accordance with paragraph 5 below; and

• " the relevant year of assessment", in relation to an attributed gain, means the year of assessment in which the gain is treated as accruing to the beneficiary.

(2) Subject to subsection (4) of the principal section, section 83 of the [1981 c. 35.] Finance Act 1981 (meaning of "capital payment" etc.) applies for the purposes of this Schedule as it applies for the purposes of sections 80 to 82 of that Act.

(3) In any case where the beneficiary is a married woman, any reference in the following provisions of this Schedule to the payment of capital gains tax by the beneficiary shall be construed as including a reference to the payment by her husband of capital gains tax which, under subsection (1) of section 45 of the principal Act, is assessed and charged on him.

Claims for postponement of tax

2 (1) Subject to sub-paragraph (3) below, in a case falling within the principal section, the provisions of this Schedule have effect to determine whether, on a claim made to the Board, payment of any of the capital gains tax referable to an attributed gain may be postponed and, if so, to what extent and for how long.

(2) A claim must be made before 1st July 1985 or, if it is later, the expiry of the period of thirty days beginning with the date of the issue of a notice of assessment requiring the payment of an amount of capital gains tax assessed, in whole or in part, by reason of an attributed gain to which the claim relates.

(3) The provisions of this Schedule do not have effect to allow postponement of the payment of the capital gains tax referable to an attributed gain if the capital gains tax chargeable on the gain—

(a) has previously been postponed under section 17(4)(b) of the principal Act (pre-6th April 1965 settlements); or

(b) subject to sub-paragraph (4) below, carries interest, by virtue of section 88(1) of the [1970 c. 9.] Taxes Management Act 1970 (interest on tax recovered to make good tax lost due to fraud, wilful default or neglect), from the date on which the tax ought to have been paid until payment;

and an attributed gain falling within paragraph (a) or paragraph (b) above is in this Schedule referred to as an ineligible gain.

(4) Sub-paragraph (3)(b) above does not apply where the tax carries interest by reason only of the neglect of any person and that neglect is remedied before 1st July 1985.

(5) In relation to a claim, any reference in this Schedule to an attributed gain to which the claim relates is a reference to such a gain—

(a) which is specified in the claim, and

(b) which is not an ineligible gain, and

(c) in respect of which the claim is not out of time by virtue of sub-paragraph (2) above,

and any reference to the settlement to which the claim relates is a reference to the settlement under which the beneficiary is a beneficiary and to the trustees of which accrued the chargeable gain which gives rise to the attributed gain or gains to which the claim relates.

(6) In a case where a claim relates to attributed gains accruing to the beneficiary by virtue of more than one settlement, the provisions of this Schedule shall have effect as if there were separate claims, each relating to the attributed gain or gains accruing by virtue of a single settlement

(7) Without prejudice to the application of sub-paragraph (2) above in a case where the personal representatives of the beneficiary receive a notice of assessment requiring the payment by them of an amount of capital gains tax assessed, in whole or in part, by reason of an attributed gain, if—

(a) before his death the beneficiary or, where paragraph 1(3) above applies, the beneficiary's husband received a notice of assessment requiring the payment by him of such an amount of capital gains tax, and

(b) at the time of his death the period within which he might make a claim in respect of any of the tax assessed by that notice had not expired,

a claim by his personal representatives relating to that tax may be made at any time before the expiry of the period of six months beginning on the date of the death of the beneficiary or, as the case may be, her husband (or, if it is later, before 1st July 1985).

(8) In relation to any claim by the personal representatives of the beneficiary, references in this Schedule to the postponement of the payment of any tax shall be construed as references to the discharge of that tax and, accordingly, paragraphs 11 and 12 below do not apply where a claim is made by the personal representatives.

Tax referable to attributed gains

3 Any reference in this Schedule to the tax referable to an attributed gain is a reference to the amount determined by multiplying the total capital gains tax on chargeable gains accruing to the beneficiary in the relevant year of assessment by a fraction—

(a) of which the numerator is the amount of the attributed gain; and

(b) the denominator is the total of the chargeable gains accruing to the beneficiary in the relevant year of assessment.

Initial calculations relevant to tax which may be postponed

4 (1) Where a claim is made, the determination referred to in paragraph 2(1) above shall, in the first instance, be made (in accordance with paragraph 6 below) by reference to—

(a) the amount defined in sub-paragraph (4) below as the unpaid tax;

(b) the amount defined in sub-paragraph (5) below as the tax already paid; and

(c) the aggregate value of any relevant benefits which, by virtue of paragraph 5 below, fall to be taken into account in relation to the claim.

(2) Subject to sub-paragraph (3) below, in this paragraph and paragraph 5 below "the base year" means the year of assessment which precedes the relevant year of assessment in relation to the attributed gain or, as the case may be, the earliest of the attributed gains to which the claim relates.

(3) Where the relevant year of assessment referred to in sub-paragraph (2) above is the year 1965-66, the base year is also that year of assessment.

(4) In relation to a claim, " the unpaid tax " means the amount of tax—

(a) which is referable to the attributed gain (or attributed gains) to which the claim relates; and

(b) which remains unpaid at the date of the claim.

(5) In relation to a claim, " the tax already paid" means the amount of tax—

(a) which has been paid at the date of the claim, excluding any tax which was so paid, or is or was otherwise borne, by the trustees of the settlement to which the claim relates; and

(b) which is referable to any attributed gains—

(i) which have accrued to the beneficiary by virtue of the settlement to which the claim relates; and

(ii) for which the relevant year of assessment is, or is later than, the base year ; and

(iii) which are not ineligible gains.

Relevant benefits

5 (1) The provisions of this paragraph have effect to determine what are the relevant benefits to be taken into account (as mentioned in paragraph 4(1)(c) above) in relation to a claim; and in the following provisions of this paragraph "the calculation period" means the period beginning at the beginning of the base year and ending on 9th March 1981.

(2) Subject to sub-paragraph (3) below, if, under or by reference to the settlement to which the claim relates or a related settlement, the beneficiary received a capital payment from the trustees of the settlement—

(a) at any time in the calculation period, or

(b) after the end of that period but before 6th April 1984, in so far as that payment represented a chargeable gain which, before 6th April 1981, accrued to the trustees of the settlement to which the claim relates,

the amount of that capital payment is a relevant benefit.

(3) In any case where, apart from this sub-paragraph, sub-paragraph (2) above would bring into account, as a relevant benefit in relation to a claim, a capital payment received under or by reference to a related settlement, and either—

(a) on a claim relating to the related settlement, the payment falls to be taken into account under this paragraph as a relevant benefit, or

(b) it appears to the Board to be likely that the payment will fall to be so taken into account on a claim relating to the related settlement,

the payment shall not be taken into account as a relevant benefit in relation to the claim referred to in sub-paragraph (2) above except to the extent that it constitutes a surplus benefit by virtue of paragraph 6(5) below.

(4) If, at any time in the period beginning at the beginning of the base year and ending at the beginning of the year of assessment in which the claim is made, the beneficiary disposed of his interest in the settlement to which the claim relates in circumstances such that, by virtue of section 58(1) of the principal Act, no chargeable gain could accrue on the disposal, then the amount or value of the consideration for the disposal is a relevant benefit.

(5) Where the disposal referred to in sub-paragraph (4) above was made before 6th April 1984, the reference in that sub-paragraph to the consideration for the disposal shall be construed as a reference only to such consideration (if any) as was actually given for the disposal.

(6) For the purposes of this Schedule, a settlement is a related settlement in relation to the settlement to which a claim relates if, by the exercise in the base year or later (whether before or after the making of the claim) of a power conferred by one of the settlements, or by the combination of such an exercise and any other transactions, property of any description forming part of the settled property of one of the settlements is at any time appointed to the other settlement or otherwise dealt with so as to increase the value of the settled property of the other settlement.

The basic rules as to postponement

6 (1) Unless on a claim the aggregate of—

(a) the unpaid tax (as defined in paragraph 4(4) above), and

(b) the tax already paid (as defined in paragraph 4(5) above),

exceeds 30 per cent. of the aggregate of the relevant benefits referred to in paragraph 4(1)(c) above, there is no postponement of the payment of any of the capital gains tax referable to the attributed gains to which the claim relates.

(2) Subject to the following provisions of this Schedule, the amount of capital gains tax payment of which is, on a claim, postponed by virtue of this Schedule is whichever is the smaller of—

(a) the unpaid tax ; and

(b) the amount of the excess referred to in sub-paragraph (1) above;

and, where the amount in paragraph (b) above is the smaller, payment of tax assessed for a later year shall be postponed in priority to payment of tax assessed for an earlier year.

(3) Without prejudice to paragraph 2(8) above, if at any time after a claim is made the beneficiary dies, any tax the payment of which would, by virtue of this Schedule, still be postponed at the date of his death shall be discharged on that date.

(4) Notwithstanding anything in Part IX of the [1970 c. 9.] Taxes Management Act 1970 (interest on overdue tax), where payment of an amount of capital gains tax is postponed by virtue of this Schedule none of that tax shall carry interest (or be taken to have carried interest) for any period before the time when the tax becomes payable in accordance with paragraph 11 below.

(5) In any case where, by virtue of sub-paragraph (1) above, there is on a claim no postponement of the payment of capital gains tax, there shall be determined—

(a) whether there would still be no postponement if there were left out of account all relevant benefits (if any) referable to capital payments received under or by reference to a related settlement, and

(b) if so, what is the excess of all the other relevant benefits over 3 1/3 times the aggregate of the tax referred to in paragraphs (a) and (b) of sub-paragraph (1) above,

and so much of those other relevant benefits as are referable to capital payments falling within sub-paragraph (2) of paragraph 5 above and equal (or do not exceed) that excess shall be regarded as a surplus benefit for the purposes of sub-paragraph (3) of that paragraph.

Effect of subsequent capital payments received by the beneficiary

7 (1) The provisions of this paragraph apply if—

(a) on a claim there would, in accordance with paragraph 6(2) above, be an amount of capital gains tax payment of which is postponed by virtue of this Schedule ; but

(b) before the beginning of the year of assessment in which the claim is made, the beneficiary has received from the trustees of the settlement to which the claim relates or a related settlement a capital payment which is not a relevant benefit and has not been brought into account under subsections (3) and (4) of section 80 of the [1981 c. 35.] Finance Act 1981 (new provisions as to gains of non-resident settlements) in determining whether chargeable gains or offshore income gains should be attributed to the beneficiary by reference to any trust gains for any previous year of assessment.

(2) If the amount of capital gains tax referred to in paragraph (a) of sub-paragraph (1) above exceeds 30 per cent. of the aggregate of the amount of the capital payments which fall within paragraph (b) of that sub-paragraph, then, subject to paragraph 9 below, the amount of capital gains tax payment of which is postponed by virtue of tins Schedule is an amount equal to that excess.

(3) If the amount of capital gains tax referred to in paragraph (a) of sub-paragraph (1) above is less than or equal to 30 per cent. of the aggregate of the amount of the capital payments which fall within paragraph (b) of that sub-paragraph, then there is no postponement of the payment of any of that capital gains tax.

(4) In any case where—

(a) the amount of capital gains tax referred to in sub-paragraph (1)(a) above equals or exceeds 30 per cent. of the aggregate of those capital payments falling within sub-paragraph (1)(b) above which the beneficiary has received from the trustees of the settlement to which the claim relates, and

(b) apart from this paragraph, those capital payments would fall to be brought into account under subsections (3) and (4) of section 80 of the [1981 c. 35.] Finance Act 1981 (new provisions as to gains of non-resident settlements) in determining whether chargeable gains or offshore income gains should be attributed to the beneficiary by reference to any trust gains for the year of assessment in which the claim is made,

then, as respects that year of assessment and any subsequent year, those capital payments shall be left out of account for the purposes of the said subsections (3) and (4).

(5) In any case where—

(a) the condition in sub-paragraph (4)(a) above is not fulfilled, but

(b) the condition in sub-paragraph (4)(b) above is fulfilled,

then, as respects the year of assessment in which the claim is made and any subsequent year, so much of the capital payments referred to in sub-paragraph (4) above as is equal to times the amount of capital gains tax referred to in sub-paragraph (1)(a) above shall be left out of account for the purposes of subsections (3) and (4) of section 80 of the Finance Act 1981.

(6) Where, by virtue of sub-paragraph (4) or sub-paragraph (5) above, the whole or any part of a capital payment falls to be left out of account as mentioned in that sub-paragraph,—

(a) the payment shall to the same extent be left out of account for the purposes of the application on any other occasion of any provision of paragraphs 7 to 12 of this Schedule ; and

(b) section 45 of the Finance Act 1981 (transfer of assets abroad: liability of non-transferors) shall have effect in relation to a benefit received by the beneficiary which, in whole or in part, consists of that payment as if, in the year of assessment in which the claim is made, chargeable gains equal to so much of that payment as falls to be so left out of account were, by reason of that payment, treated under section 80 of that Act as accruing to the beneficiary.

(7) Where any capital payments falling within sub-paragraph (1)(b) above which the beneficiary has received from the trustees of the settlement to which the claim relates are not such as are referred to in sub-paragraph (4)(b) above, sub-paragraph (6)(a) above shall apply to each of those payments in like manner as if it had been such a payment as is referred to in sub-paragraph (4)(b) above and the amount of it to be left out of account had been determined accordingly under sub-paragraph (4) or sub-paragraph (5) above.

8 (1) The provisions of this paragraph apply if, in a case where paragraph 7 above applies, the amount of capital gains tax referred to in sub-paragraph (1)(a) of that paragraph exceeds 30 per cent. of the aggregate of those capital payments falling within sub-paragraph (1)(b) of that paragraph which the beneficiary has received from the trustees of the settlement to which the claim relates.

(2) In the following provisions of this paragraph—

(a) the capital payments falling within sub-paragraph (1)(b) of paragraph 7 above which the beneficiary has received otherwise than from the trustees of the settlement to which the claim relates are referred to as " related payments " ; and

(b) any of those related payments which, apart from this paragraph, would fall to be brought into account as mentioned in sub-paragraph (4)(b) of paragraph 7 above is referred to as a " related section 80 payment".

(3) If sub-paragraph (2) of paragraph 7 above applies, then—

(a) as respects the year of assessment in which the claim is made and any subsequent year, any related section 80 payment shall be left out of account for the purposes of sub-paragraphs (3) and (4) of section 80 of the [1981 c. 35.] Finance Act 1981 ; and

(b) all the related payments shall be left out of account for the purposes of the application on any other occasion of any provision of paragraphs 7 to 12 of this Schedule.

(4) If sub-paragraph (3) of paragraph 7 above applies, then—

(a) as respects the year of assessment in which the claim is made and any subsequent year, so much of any related section 80 payment as is equal to 3J times the amount of capital gains tax released by that payment shall be left out of account for the purposes of subsections (3) and (4) of section 80 of the Finance Act 1981 ; and

(b) so much of each of the related payments as is equal to 3J times the amount of capital gains tax released by the payment shall be left out of account for the purposes mentioned in sub-paragraph (3)(b) above.

(5) For the purposes of sub-paragraph (4) above, the amount of capital gains tax released by a related payment shall be determined by the formula—

where—

• " A " is the capital gains tax referred to in sub-paragraph (1)(a) of paragraph 7 above ;

• " B " is an amount equal to 30 per cent. of the aggregate of those capital payments falling within sub-paragraph (1)(b) of that paragraph which the beneficiary has received from the trustees of the settlement to which the claim relates ;

• " C " is the related payment in question ; and

• " D " is the aggregate of all the related payments.

(6) Where, by virtue of sub-paragraph (3)(a) or sub-paragraph (4)(a) above, the whole or any part of a related section 80 payment falls to be left out of account as mentioned in that sub-paragraph, section 45 of the [1981 c. 35.] Finance Act 1981 shall have effect in relation to the benefit received by the beneficiary which, in whole or in part, consists of that payment as if, in the year of assessment in which the claim is made, chargeable gains equal to so much of that payment as falls to be so left out of account were, by reason of that payment, treated under section 80 of that Act as accruing to the beneficiary.

Effect of related benefits derived from payments received by close relatives of the beneficiary

9 (1) The provisions of this paragraph apply if,—

(a) on a claim, payment of an amount of capital gains tax determined in accordance with paragraph 6(2) or paragraph 7(2) above would, apart from this paragraph, be postponed by virtue of this Schedule ; and

(b) as a result of a capital payment received by a close relative of the beneficiary, there is, in accordance with paragraph 10 below, a related benefit which falls to be taken into account in relation to the claim.

(2) If the amount of capital gains tax referred to in sub-paragraph (1)(a) above exceeds 30 per cent. of the aggregate of the related benefits which fall to be taken into account in relation to the claim, then the amount of capital gains tax payment of which is postponed by virtue of this Schedule is an amount equal to that excess.

(3) If the amount of capital gains tax referred to in sub-paragraph (1)(a) above is less than or equal to 30 per cent. of the aggregate of the related benefits which fall to be taken into account in relation to the claim, then there is no postponement of the payment of any of that capital gains tax.

Related benefits

10 (1) The provisions of this paragraph have effect to determine what are, in relation to a claim, the related benefits which are to be taken into account under paragraph 9 above.

(2) If, on or after 6th April 1984 and before the beginning of the year of assessment in which the claim is made, a close relative of the beneficiary has received from the trustees of the settlement to which the claim relates or a related settlement a capital payment which has not been brought into account under subsections (3) and (4) of section 80 of the Finance Act 1981 in determining whether chargeable gains or offshore income gains should be attributed to the close relative by reference to any trust gains for any previous year of assessment, then, subject to sub-paragraphs (3) and (4) below, that capital payment is a related benefit which falls to be taken into account in relation to the claim.

(3) A capital payment falling within sub-paragraph (2) above is not a related benefit which falls to be taken into account as mentioned in that sub-paragraph to the extent that it has already been taken into account on any previous operation of sub-paragraph (4) or sub-paragraph (5) of paragraph 7 above on the occasion of a claim in respect of which the close relative himself or a close relative of his or a person whose close relative he is was the beneficiary.

(4) A capital payment falling within sub-paragraph (2) above is not a related benefit which falls to be taken into account as mentioned in that sub-paragraph if the Board so direct on the grounds that it appears likely that the payment will fall to be taken into account, either as giving rise to a relevant benefit or under paragraph 7 above, in relation to such a claim as is referred to in sub-paragraph (3) above.

(5) Sub-paragraphs (3) to (6) of paragraph 8 above shall have effect for the purposes of this paragraph—

(a) as if any reference to a provision of paragraph 7 above were a reference to the corresponding provision of paragraph 9 above ; and

(b) as if any reference to a related payment were a reference to a related benefit which falls to be taken into account as mentioned in sub-paragraph (2) above ; and

(c) as if any reference to a related section 80 payment were a reference to a related benefit which falls to be taken into account as mentioned in sub-paragraph (2) above and which, apart from this paragraph, would fall to be taken into account under sub-paragraphs (3) and (4) of section 80 of the [1981 c. 35.] Finance Act 1981 in determining whether chargeable gains or offshore income gains should be attributed to the close relative concerned by reference to any trust gains for the year of assessment in which is made the claim referred to in sub-paragraph (2) above ; and

(d) as if " B " in the formula in sub-paragraph (5) were nil; and

(e) as if any reference in sub-paragraph (6) to the beneficiary were a reference to the close relative concerned.

Time when postponed tax becomes payable

11 (1) The provisions of this paragraph apply where, as a result of a claim, payment of an amount of capital gains tax, determined in accordance with paragraphs 6 to 9 above, is postponed by virtue of this Schedule ; and, subject to sub-paragraph (6) below, any reference in the following provisions of this paragraph to postponed tax is a reference to tax the payment of which is so postponed.

(2) Postponed tax shall become payable in accordance with sub-paragraph (5) below if, at any time in the year of assessment in which the claim is made or any later year, the beneficiary disposes of his interest in the settlement to which the claim relates in circumstances such that, by virtue of section 58(1) of the principal Act, no chargeable gain could accrue on the disposal; and in sub-paragraph (5) below " the relevant consideration " means the amount or value of the consideration for such a disposal.

(3) Subject to paragraph 12 below, postponed tax shall become payable in accordance with sub-paragraph (5) below if, in the year of assessment in which the claim is made or any later year, the beneficiary or a close relative of his receives a capital payment from the trustees of the settlement to which the claim relates or a related settlement.

(4) In the following provisions of this paragraph and paragraph 12 below, any reference to a material year of assessment is a reference to one in which the beneficiary disposes of his interest as mentioned in sub-paragraph (2) above or in which sub-paragraph (3) above applies.

(5) For any material year of assessment, so much of the postponed tax as does not exceed 30 per cent. of the aggregate of—

(a) the relevant consideration in respect of any disposal in that year, and

(b) subject to paragraph 12 below, the capital payments received in that year as mentioned in sub-paragraph (3) above,

shall become payable as if it were capital gains tax assessed in respect of gains accruing in that year.

(6) If, for any material year of assessment, the amount of the postponed tax exceeds 30 per cent. of the aggregate referred to in sub-paragraph (5) above, only the excess shall continue after the end of that year to be postponed tax for the purposes of this paragraph, but without prejudice to the subsequent operation of this paragraph in relation to a later year of assessment which is a material year.

(7) Where part, but not the whole, of any postponed tax becomes payable in accordance with sub-paragraph (5) above, tax assessed for an earlier year shall be regarded as becoming so payable before tax assessed for a later year.

Balance of capital payments

12 (1) If any capital payments received in any year of assessment as mentioned in paragraph 11(3) above fall to be brought into account for that year for the purposes of subsections (3) and (4) of section 80 of the [1981 c. 35.] Finance Act 1981, those capital payments shall be disregarded for the purposes of sub-paragraph (5) or, as the case may be, sub-paragraph (6) of paragraph 11 above except to the extent that the aggregate of those payments exceeds the chargeable gains and offshore income gains which in that year are treated under the said section 80 as accruing to the beneficiary or, as the case may be, the close relative ; and any such excess is in the following provisions of this paragraph referred to as the balance of section 80 payments for that year.

(2) Subject to the following provisions of this paragraph, as respects any year of assessment subsequent to a material year of assessment for which there is a balance of section 80 payments there shall be left out of account for the purposes of subsections (3) and (4) of section 80 of the [1981 c. 35.] Finance Act 1981 so much of the capital payments as made up that balance.

(3) If paragraph 11(6) above did not apply for any material year of assessment for which there is a balance of section 80 payments then, as respects years of assessment subsequent to that year, sub-paragraph (2) above shall apply only to so much of the capital payments mentioned therein as is equal to 3J times the amount of postponed tax released by that balance.

(4) For any material year of assessment, the amount of postponed tax released by a balance of section 80 payments for that year shall be determined by the formula:—

where

• "E" is the postponed tax, within the meaning of paragraph 11 above ;

• "F" is an amount equal to 30 per cent. of any consideration for that year which falls within sub-paragraph (5)(a) of that paragraph ;

• "G" is the balance of the section 80 payments for that year ; and

• "H" is the aggregate of the capital payments (including that balance) taken into account under sub-paragraph (5)(b) of that paragraph for that year.

(5) If, in a case where sub-paragraph (2) above applies in accordance with sub-paragraph (3) above, there were, for the material year of assessment concerned,—

(a) a balance of section 80 payments derived from payments received by the beneficiary, and

(b) another such balance derived from payments received by a close relative of his,

sub-paragraph (2) above shall apply (in accordance with sub-paragraph (3) above) to the capital payments which made up the balance derived from payments received by the beneficiary in priority to Capital payments which made up the other balance.

(6) Subject to sub-paragraph (5) above, where there is more than one capital payment to which sub-paragraph (2) above applies, the proportion of each of them which is left out of account as mentioned in that sub-paragraph shall be the same.

(7) Where, by virtue of the preceding provisions of this paragraph, the whole or any part of a capital payment falls to be left out of account as mentioned in sub-paragraph (2) above, section 45 of the [1981 c. 35.] Finance Act 1981 shall have effect in relation to a benefit which is received by the beneficiary or, as the case may be, a close relative of his and which, in whole or in part, consists of that payment as if, in the material year of assessment concerned, chargeable gains equal to so much of that payment as falls to be so left out of account were, by reason of that payment, treated under section 80 of that Act as accruing to the beneficiary or, as the case may be, the close relative.

13 (1) Where, by virtue of sub-paragraph (2) of paragraph 12 above, the whole or any part of a capital payment falls to be left out of account as mentioned in that sub-paragraph, it shall to the same extent be left out of account for the purposes of the application on any other occasion of any provision of paragraphs 7 to 12 of this Schedule.

(2) Where sub-paragraph (6) of paragraph 11 above applies for any material year of assessment, any capital payments which—

(a) fall to be taken into account under sub-paragraph (5)(b) of that paragraph for that year, and

(b) are not such as to fall within paragraph 12(1) above,

shall be left out of account for the purposes referred to in sub-paragraph (1) above.

(3) Where sub-paragraph (6) of paragraph 11 above does not apply for any material year of assessment, so much of any capital payment falling within paragraphs (a) and (b) of sub-paragraph (2) above as is equal to 3 1/3 times the amount of postponed tax released by that payment shall be left out of account for the purposes referred to in sub-paragraph (1) above.

(4) The amount of postponed tax released by a capital payment shall be determined for the purposes of sub-paragraph (3) above by the formula in paragraph 12(4) above, except that, in applying that formula for those purposes, " G " shall be the amount of the capital payment in question.

(5) In this paragraph, " material year of assessment" shall be construed in accordance with paragraph 11(4) above.

Second and later claims

14 (1) This paragraph applies where—

(a) as a result of a claim (in this paragraph referred to as " the earlier claim "), payment of an amount of capital gains tax (in this paragraph referred to as " the original tax "), determined in accordance with paragraph 6 or paragraph 7 above, is or was postponed by virtue of this Schedule ; and

(b) after the making of the earlier claim, another claim (in this paragraph referred to as " the later claim ") is made in relation to an attributed gain to which the earlier claim did not relate; and

(c) the settlement to which the earlier and the later claims relate is the same.

(2) If the year of assessment which is the relevant year of assessment in relation to any attributed gain to which the later claim relates is earlier than the earliest year of assessment which is the relevant year of assessment in relation to any attributed gain to which the earlier claim related, then,—

(a) the earlier claim and the postponement resulting from it shall be set aside ; and

(b) the provisions of this Schedule shall have effect as if (notwithstanding paragraph 2(2) above) the attributed gains to which the later claim relates included the attributed gains to which the earlier claim related.

(3) Where sub-paragraph (2) above does not apply and, at the time the later claim is made, payment of any of the original tax remains postponed by virtue of this Schedule, then, subject to sub-paragraph (4) below,—

(a) paragraphs 4 to 10 above shall not apply in relation to the later claim ; and

(b) payment of the tax referable to the attributed gain or gains to which the later claim relates shall be postponed by virtue of this Schedule ; and

(c) paragraphs 11 and 12 above shall apply as if the payment of that tax had been postponed as a result of the earlier claim and, accordingly, that tax shall be added to the original tax.

(4) If, in a case where sub-paragraph (3) above applies, the relevant year of assessment in relation to an attributed gain (in this sub-paragraph referred to as "the later gain") to which the later claim relates is the same as the relevant year of assessment in relation to an attributed gain to which the earlier claim related,—

(a) paragraph 3 above shall not apply in relation to the later gain ; and

(b) in relation to the later gain, the references in sub-paragraph (3) above to the tax referable to the gain shall be construed as references to the capital gains tax assessed by reason of the gain.

(5) Where sub-paragraph (2) above does not apply and, at the time the later claim is made, there is no longer any postponement of the payment of any of the original tax, then, in the application of the provisions of this Schedule in relation to the later claim, paragraph 4(2) above shall not apply and " the base year " for the purposes of paragraphs 4 and 5 above shall be that year of assessment which was the base year in relation to the earlier claim.

Information

15 (1) The Board may by notice in writing require any person to furnish them, within such time as they may direct, not being less than twenty-eight days, with such particulars as they think necessary for the purposes of section 70 of this Act and this Schedule.

(2) Subsections (2) to (5) of section 481 of the Taxes Act shall have effect in relation to sub-paragraph (1) above as they have effect in relation to subsection (1) of that section ; but, in the application of those subsections by virtue of this sub-paragraph, references to Chapter III of Part XVII of the Taxes Act shall be construed as references to section 70 of this Act and this Schedule.

(3) In any case where—

(a) a claim has been made, and

(b) as a result of the claim, payment of an amount of capital gains tax was postponed by virtue of this Schedule, and

(c) at a time when any of that tax remains unpaid, there is a disposal to which paragraph 11(2) above applies or the beneficiary or a close relative of his receives such a capital payment as is referred to in paragraph 11(3) above,

then, not later than three months after the end of the year of assessment in which the disposal occurs or the payment is received, the beneficiary shall inform the Board of the disposal or receipt, as the case may be.

(4) The Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties for failure to comply with notices, furnish information etc.) shall be amended as follows—

(a) at the end of the first column there shall be inserted—

“Paragraph 15(1) of Schedule 14 to the Finance Act 1984”; and

(b) at the end of the second column there shall be inserted—

“Paragraph 15(3) of Schedule 14 to the Finance Act 1984”.

Consequential relief from C.T.T

16 In any case where—

(a) payment of an amount of capital gains tax is postponed by virtue of this Schedule, and

(b) any of that tax becomes payable in accordance with paragraph 11 above by reason of the receipt of a capital payment by a close relative of the beneficiary, as mentioned in sub-paragraph (3) of that paragraph, and

(c) all or part of the tax becoming so payable is paid by the close relative,

the payment by the close relative shall be treated for the purposes of capital transfer tax as made in satisfaction of a liability of his.

Section 72(7) and 76.

SCHEDULE 15 OFFSHORE LIFE ASSURANCE: NEW NON-RESIDENT POLICIES

PART I Paragraph to be Inserted in Part I of Schedule 2 To [1975 c. 7.] Finance Act 1975

“1A (1) The provisions of this paragraph apply to a policy of life insurance—

(a) which is issued in respect of an insurance made after 17th November 1983 ; and

(b) which is so issued by a company resident outside the United Kingdom;

and in the following provisions of this paragraph such a policy is referred to as a " new non-resident policy " and the company by which it is issued is referred to as " the issuing company ".

(2) Notwithstanding anything in paragraph 1 above—

(a) a new non-resident policy shall not be certified under sub-paragraph (1)(a) of that paragraph, and

(b) a new non-resident policy which conforms with such a form as is mentioned in sub-paragraph (1)(b) of that paragraph shall not be a qualifying policy,

until such time as the conditions in either sub-paragraph (3) or sub-paragraph (4) below are fulfilled with respect to it.

(3) The conditions first referred to in sub-paragraph (2) above are—

(a) that the issuing company is lawfully carrying on in the United Kingdom life assurance business (as defined in section 323(2) of the Taxes Act); and

(b) that the premiums under the policy are payable to a branch in the United Kingdom of the issuing company, being a branch through which the issuing company carries on its life assurance business ; and

(c) the premiums under the policy form part of those business receipts of the issuing company which arise through that branch.

(4) The conditions secondly referred to in sub-paragraph (2) above are—

(a) that the policy holder is resident in the United Kingdom ; and

(b) that the income of the issuing company from the investments of its life assurance fund is, by virtue of section 316 of the Taxes Act, charged to corporation tax under Case III of Schedule D ;

and expressions used in paragraph (b) above have the same meaning as in subsection (1) of the said section 316.”

PART II Modifications of Provisions Relating to Qualifying Policies

1 In this Part of this Schedule—

• " Schedule 1 " means Schedule 1 to the Taxes Act (qualifying conditions etc.);

• " Schedule 2 " means Schedule 2 to the [1975 c. 7.] Finance Act 1975 (certification of qualifying policies etc.) ; and

• " the old policy" and " the new policy " have the same meaning as in paragraph 9 of Schedule 1.

2 (1) In the application of paragraph 9 of Schedule 1 (substitutions) in any case where—

(a) the old policy was issued in respect of an insurance made after 17th November 1983 and could not be a qualifying policy by virtue of paragraph 1A of Schedule 2, and

(b) the new policy is not a new non-resident policy, as defined in the said paragraph 1A,

the rules for the determination of the question whether the new policy is a qualifying policy shall apply with the modifications in sub-paragraph (2) below.

(2) The modifications referred to in sub-paragraph (1) above are as follows:—

(a) if, apart from paragraph 1A of Schedule 2, the old policy and any related policy (within the meaning of sub-paragraph (2)(b) of paragraph 9 of Schedule 1) of which account falls to be taken would have been, or would have been capable of being certified qualifying policy under paragraph 1 of Schedule 2, that policy shall be assumed to have been a qualifying policy for the purposes of paragraph 9(2) of Schedule 1 ; and

(b) if, apart from this paragraph, the new policy would be, or would be capable of being certified as, a qualifying policy, it shall not be such a policy or, as the case may be, be capable of being so certified unless the circumstances are as specified in paragraph 9(3) of Schedule 1 ; and

(c) in paragraph 9(3)(b) of Schedule 1 the words "either by a branch or agency of theirs outside the United Kingdom or " shall be omitted.

(3) In the application of paragraph 9 of Schedule 1 in any case where—

(a) the old policy is a qualifying policy which was issued in respect of an insurance made on or before 17th November 1983 but, if the insurance had been made after that date, the policy could not have been a qualifying policy by virtue of paragraph 1A of Schedule 2, and

(b) the new policy is issued after 17th November 1983 and is not a new non-resident policy, as defined in the said paragraph 1A,

the rules for the determination of the question whether the new policy is a qualifying policy shall apply with the modification in sub-paragraph (2)(c) above.

3 If, in the case of a substitution of policies falling within sub-paragraph (1) or sub-paragraph (3) of paragraph 2 above, the new policy confers such an option as results in the application to it of sub-paragraph (3) of paragraph 3 of Schedule 2 (amendment of qualifying conditions) the new policy shall be treated for the purposes of that sub-paragraph as having been issued in respect of an insurance made on the same day as that on which was made the insurance in respect of which the old policy was issued.

4 (1) For the purposes of Schedule 1 and Part I of Schedule 2, a policy of life insurance which was issued—

(a) in respect of an insurance made on or before 17th November 1983, and

(b) by a company resident outside the United Kingdom,

shall be treated as issued in respect of an insurance made after that date if the policy is varied after that date so as to increase the benefits secured or to extend the term of the insurance.

(2) If a policy of life insurance which was issued as mentioned in paragraphs (a) and (b) of sub-paragraph (1) above confers on the person to whom it is issued an option to have another policy substituted for it or to have any of its terms changed, then for the purposes of that sub-paragraph any change in the terms of the policy which is made in pursuance of the option shall be deemed to be a variation of the policy.

PART III Modifications of Chargeable Events Legislation

5 In this Part of this Schedule—

(a) " chargeable event" has, subject to paragraph 6 below, the meaning assigned to it by section 394 of the Taxes Act (life policies) or, as the case may be, section 398 of that Act (capital redemption policies); and

(b) " new non-resident policy " has the meaning assigned to it by paragraph 1A of Schedule 2 to the [1975 c. 7.] Finance Act 1975.

6 If, in the case of a substitution of policies falling within sub-paragraph (1) or sub-paragraph (3) of paragraph 2 above, the new policy is a qualifying policy, section 394 of the Taxes Act shall have effect with the following modifications:—

(a) the surrender of the rights conferred by the old policy shall not be a chargeable event; and

(b) the new policy shall be treated as having been issued in respect of an insurance made on the day referred to in paragraph 3 above.

7 If at any time neither the conditions in sub-paragraph (3) nor the conditions in sub-paragraph (4) of paragraph 1A of Schedule 2 to the Finance Act 1975 are fulfilled with respect to a new non-resident policy which has previously become a qualifying policy, then, from that time onwards, Chapter III of Part XIV of the Taxes Act shall apply in relation to the policy as if it did not fall within subsection (2) of section 394 of that Act (qualifying policies).

8 (1) On the happening of a chargeable event in relation to a new non-resident policy or a new offshore capital redemption policy, the amount which, apart from this paragraph, would by virtue of section 395 of the Taxes Act be treated as a gain arising in connection with the policy shall be reduced by multiplying it by a fraction of which—

(a) the denominator is the number of days in the period for which the policy has run before the happening of the chargeable event; and

(b) the numerator is the number of days in the period referred to in paragraph (a) above on which the policy holder was resident in the United Kingdom.

(2) The calculation of the number of days in the period referred to in sub-paragraph (1) above shall be made in like manner as is provided in the second paragraph of subsection (3) of section 400 of the Taxes Act (substituting a reference to the number of days for the reference in that paragraph to the number of years).

9 (1) Subject to sub-paragraph (2) below, where, under section 395 of the Taxes Act, a gain (reduced in accordance with paragraph 8 above) is to be treated as arising in connection with a new non-resident policy or a new offshore capital redemption policy—

(a) section 399 of that Act shall have effect, in relation to the gain, as if subsection (4) were omitted ; and

(b) the gain shall be chargeable to tax under Case VI of Schedule D ;

but any relief under section 400 of the Taxes Act shall be computed as if this paragraph had not been enacted.

(2) Paragraphs (a) and (b) of sub-paragraph (1) above do not apply to a gain arising in connection with a new non-resident policy if the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 1A of Schedule 2 to the [1975 c. 7.] Finance Act 1975 are fulfilled at all times between the date on which the policy was issued and the date on which the gain is treated as arising.

10 Where a claim is made under section 400 of the Taxes Act in respect of the amount of a gain treated as arising in connection with a new non-resident policy or a new offshore capital redemption policy (with or without other amounts), the " appropriate fraction " which, in accordance with subsection (2) of that section, is to be applied to that amount shall be modified by deducting from the number of complete years referred to in subsection (3) of that section any complete years during which the policy holder was not resident in the United Kingdom.

11 Paragraph 18 of Schedule 2 to the Finance Act 1975 (which modifies the operation of section 400(3) of the Taxes Act when there is more than one chargeable event of a particular description) shall not apply in relation to a new non resident policy or a new offshore capital redemption policy.

Sections 82(6), 85(2) and 86(6).

SCHEDULE 16 ASSUMPTIONS FOR CALCULATING CHARGEABLE PROFITS, CREDITABLE TAX AND CORRESPONDING UNITED KINGDOM TA)( OF FOREIGN COMPANIES

General

1 (1) The company shall be assumed to be resident in the United Kingdom.

(2) Nothing in sub-paragraph (1) above requires it to be assumed that there is any change in the place or places at which the company carries on its activities.

(3) For the avoidance of doubt, it is hereby declared that, if any sums forming part of the company's profits for an accounting period have been received by the company without any deduction of or charge to tax by virtue of section 99 or section 100 of the Taxes Act (securities held by non-residents), the effect of the assumption in sub-paragraph (1) above is that those sums are to be brought within the charge to tax for the purposes of calculating the company's chargeable profits or corresponding United Kingdom tax.

(4) In any case where—

(a) it is at any time necessary for any purpose of this Act to determine the chargeable profits of the company for an accounting period, and

(b) at that time no direction has been given under section 82(1) of this Act with respect to that or any earlier accounting period of the company,

it shall be assumed, for the purpose of any of the following provisions of this Schedule which refer to the first accounting period in respect of which a direction is given under that section, that such a direction has been given for that period (but not for any earlier period).

(5) Nothing in this Schedule affects any liability for, or the computation of, corporation tax in respect of a trade which is carried on by a company resident outside the United Kingdom through a branch or agency in the United Kingdom.

2 (1) The company shall be assumed to have become resident in the United Kingdom (and, accordingly, within the charge to corporation tax) at the beginning of the first accounting period in respect of which a direction is given under section 82(1) of this Act and that United Kingdom residence shall be assumed to continue throughout subsequent accounting periods of the company (whether or not a direction is given in respect of all or any of them) until the company ceases to be controlled by persons resident in the United Kingdom.

(2) Except in so far as the following provisions of this Schedule otherwise provide, for the purposes of calculating a company's chargeable profits or corresponding United Kingdom tax for any accounting period which is not the first such period referred to in sub-paragraph (1) above (and, in particular, for the purpose of applying any relief which is relevant to two or more accounting periods), it shall be assumed that a calculation of chargeable profits or, as the case may be, corresponding United Kingdom tax has been made for every previous accounting period throughout which the company was, by virtue of sub-paragraph (1) above, assumed to have been resident in the United Kingdom.

3 The company shall be assumed not to be a close company.

4 (1) Subject to sub-paragraph (2) below, where any relief under the Corporation Tax Acts is dependent upon the making of a claim or election, the company shall be assumed to have made that claim or election which would give the maximum amount of relief and to have made that claim or election within any time limit applicable to it

(2) If, by notice in writing given to the Board at any time not later than the expiry of the time for the making of an appeal under section 88 of this Act or within such longer period as the Board may in any particular case allow, the United Kingdom resident company which has or, as the case may be, any two or more United Kingdom resident companies which together have, a majority interest in the company so request, the company shall be assumed—

(a) not to have made any claim or election specified in the notice; or

(b) to have made a claim or election so specified, being different from one assumed by sub-paragraph (1) above but being one which (subject to compliance with any time limit) could have been made in the case of a company within the charge to corporation tax ; or

(c) to have disclaimed or required the postponement, in whole or in part, of an allowance if (subject to compliance with any time limit) a company within the charge to corporation tax could have disclaimed the allowance or, as the case may be, required such a postponement.

(3) For the purposes of this paragraph, a United Kingdom resident company has, or two or more United Kingdom resident companies together have, a majority interest in the company if on the apportionment of the company's chargeable profits for the relevant accounting period under subsection (3) of section 82 of this Act, more than half of the profits—

(a) which are apportioned to United Kingdom resident companies, and

(b) which give rise to an assessment on any such companies under subsection (4)(a) of that section,

are apportioned to the United Kingdom resident company or companies concerned.

(4) In sub-paragraph (3) above " the relevant accounting period " means the accounting period or, as the case may be, the first accounting period in which the relief in question is or would be available in accordance with sub-paragraph (1) above.

Group relief, etc.

5 The company shall be assumed to be neither a member of a group of companies nor a member of a consortium for the purposes of any provision of the Tax Acts.

6 (1) In relation to section 256 of the Taxes Act (group income) it shall be assumed—

(a) that the conditions for the making of an election under subsection (1) are not fulfilled with respect to dividends paid or received by the company ; and

(b) that the conditions for the making of an election under subsection (2) are not fulfilled with respect to payments made or received by the company.

(2) References in sub-paragraph (1) above to dividends or payments received by the company apply to any received by another person on behalf of or in trust for the company, but not to any received by the company on behalf of or in trust for another person.

7 The company shall be assumed not to be a subsidiary to which the benefit of any advance corporation tax may be surrendered under section 92 of the [1972 c. 41.] Finance Act 1972.

Company reconstructions

8 Without prejudice to the operation of section 252 of the Taxes Act (company reconstructions without change of ownership) in a case where the company is the predecessor, within the meaning of that section, and a company resident in the United Kingdom is the successor, within the meaning of that section, the assumption that the company is resident in the United Kingdom shall not be regarded as requiring it also to be assumed that the company is within the charge to tax in respect of a trade for the purposes of section 252 of the Taxes Act and, accordingly, except in so far as the company is actually within that charge (by carrying on the trade through a branch or agency in the United Kingdom), it shall be assumed that the company can never be the successor, within the meaning of that section, to another company (whether resident in the United Kingdom or not).

Losses in pre-direction accounting periods

9 (1) Subject to sub-paragraph (2) below, this paragraph applies in any case where the company incurred a loss in a trade in an accounting period—

(a) which precedes the first accounting period in respect of which a direction is given under section 82(1) of this Act (in this paragraph referred to as " the starting period "); and

(b) which ended less than six years before the beginning of the starting period ; and

(c) in which the company was not resident in the United Kingdom ;

and in this paragraph any such accounting period is referred to as a " pre-direction period ".

(2) This paragraph does not apply in any case where a declaration is made under paragraph 11(3) below specifying an accounting period of the company which begins before, or is the same as, the first pre-direction period in which the company incurred a loss as mentioned in sub-paragraph (1) above.

(3) If a claim is made for the purpose by the United Kingdom resident company or companies referred to in paragraph 4(2) above, the chargeable profits (if any) of the company for accounting periods beginning with that pre-direction period which is specified in the claim and in which a loss is incurred as mentioned in sub-paragraph (1) above shall be determined (in accordance with the provisions of this Schedule other than this paragraph) on the assumption that that pre-direction period was the first accounting period in respect of which a direction was given under section 82(1) of this Act.

(4) A claim under sub-paragraph (3) above shall be made by notice in writing given to the Board within sixty days of the date of the notice under subsection (1) or subsection (3) of section 88 of this Act relating to the starting period or within such longer period as the Board may in any particular case allow.

(5) For the purposes of a claim under sub-paragraph (3) above, it shall be assumed that Chapter VI of Part II of this Act was in force before the beginning of the first of the pre-direction periods.

(6) In determining for the purposes of this paragraph which accounting period of the company is the starting period, no account shall be taken of the effect of any declaration under paragraph 11(3) below.

Capital allowances

10 (1) Subject to paragraphs 11 and 12 below, if, in an accounting period falling before the beginning of the first accounting period in respect of which a direction is given under section 82(1) of this Act, the company incurred any capital expenditure on the provision of machinery or plant for the purposes of its trade, that machinery or plant shall be assumed, for the purposes of section 44 of the [1971 c. 68.] Finance Act 1971 (writing-down allowances and balancing adjustments), not to have been brought into use for the purposes of that trade until the beginning of that first accounting period, and paragraph 7 of Schedule 8 to that Act (expenditure treated as equivalent to market value at the time the machinery or plant is brought into use) shall apply accordingly.

(2) This paragraph shall be construed as one with Chapter I of Part III of the Finance Act 1971.

11 (1) This paragraph applies in any case where it appears to the Board that the reason why no direction was given under section 82(1) of this Act in respect of an accounting period which precedes the starting period was that the effect of any allowance which would be assumed for that preceding period by virtue of this Schedule would be such that—

(a) the company would not have been considered, to be subject in that accounting period to a lower level of taxation in the territory in which it was resident; or

(b) the company would have had no chargeable profits for that accounting period; or

(c) the chargeable profits of the company for that accounting period would not have exceeded £20,000 or such smaller amount as was appropriate in accordance with section 83(1)(d) of this Act.

(2) In this paragraph " the starting period" means the first accounting period in respect of which a direction is given under section 82(1) of this Act and, in a case where a claim is made under sub-paragraph (3) of paragraph 9 above, no account shall be taken of the effect of that sub-paragraph in determining which accounting period is the starting period for the purposes of this paragraph.

(3) If, in a case where this paragraph applies, the Board so declare by notice in writing given to every company to which, in accordance with section 88(1) of this Act, notice of the making of the direction relating to the starting period is required to be given, the chargeable profits of that period and every subsequent accounting period and the corresponding United Kingdom tax for every subsequent accounting period shall be determined (in accordance with the provisions of this Schedule other than this paragraph) on the assumption that the accounting period specified in the declaration was the first accounting period in respect of which a direction was given and, accordingly, as if allowances had been assumed in respect of that accounting period and any subsequent accounting period which precedes the starting period.

(4) Nothing in sub-paragraph (3) above affects the operation of paragraph 9(3) above in a case where the accounting period specified in a claim under the said paragraph 9(3) begins before the period specified in a declaration under sub-paragraph (3) above.

(5) Subject to sub-paragraph (6) below, the Board shall not make a declaration under sub-paragraph (3) above with respect to an accounting period which precedes the starting period unless the facts are such that—

(a) assuming the company to have been subject in that period to a lower level of taxation in the territory in which it was resident, and

(b) assuming the company to have had in that period chargeable profits of such an amount that the condition in section 83(1)(d) of this Act would not be fulfilled,

a direction could have been given in respect of that period under section 82(1) of this Act.

(6) In its application to a company falling within section 84(3) of this Act, sub-paragraph (5) above shall have effect with the omission of paragraph (a).

(7) In this paragraph "allowance" means an allowance under Chapter I of Part I of the [1968 c. 3.] Capital Allowances Act 1968 or Chapter I of Part III of the [1971 c. 68.] Finance Act 1971.

12 (1) Notwithstanding anything in the preceding provisions of this Schedule, if it appears that the transaction by which an asset was acquired by the company had as its sole or main purpose the reduction of the amount of the company's chargeable profits or, as the case may be, corresponding United Kingdom tax for any accounting period (by virtue of the assumption of a relevant allowance in respect of that asset), it shall be assumed that no relevant allowance is available to the company in respect of expenditure incurred on the acquisition of that asset.

(2) In sub-paragraph (1) above " relevant allowance " means—

(a) an initial allowance under Chapter I of Part I of the Capital Allowances Act 1968 (industrial buildings and structures); or

(b) a first-year allowance, as defined in section 41 of the Finance Act 1971.

Unremittable overseas income

13 For the purposes of the application of section 418 of the Taxes Act (relief for unremittable income) to the company's income it shall be assumed—

(a) that any reference in paragraph (a) or paragraph (b) of subsection (1) of that section to the United Kingdom is a refererence to both the United Kingdom and the territory in which the company is in fact resident; and

(b) that a notice under subsection (2) of that section (expressing a wish to be assessed in accordance with that subsection) may be given on behalf of the company by the United Kingdom resident company or companies referred to in paragraph 4(2) above.

Section 83.

SCHEDULE 17 CASES EXCLUDED FROM DIRECTION-MAKING POWERS

PART I Acceptable Distribution Policy

1 The provisions of this Part of this Schedule have effect for the purposes of paragraph (a) of subsection (1) of section 83 of this Act.

2 (1) Subject to sub-paragraph (2) below, a controlled foreign company pursues an acceptable distribution policy in respect of a particular accounting period if, and only if—

(a) a dividend which is not paid out of specified profits is paid for that accounting period or for some other period which, in whole or in part, falls within that accounting period : and

(b) the dividend is paid during, or not more than eighteen months after the expiry of, the period for which it is paid or at such later time as the Board may in any particular case allow; and

(c) the proportion of the dividend or, if there is more than one, of the aggregate of those dividends which is paid to persons resident in the United Kingdom represents at least 50 per cent. of the company's available profits for the accounting period referred to in paragraph (a) above or, where sub-paragraph (4) or sub-paragraph (5) below applies, of the appropriate portion of those profits ;

and for the purposes of this sub-paragraph a dividend which is not paid for a specified period shall be treated as paid for the period or periods the profits of which are, in relation to the dividend, the relevant profits for the purposes of section 506 of the Taxes Act (computation of underlying tax on dividends).

(2) In the case of a controlled foreign company which is not a trading company, sub-paragraph (1) above shall have effect with the substitution of 90 per cent. for 50 per cent.

(3) For the purposes of this Part of this Schedule, a dividend represents those profits of the controlled foreign company in question which in relation to that dividend are the relevant profits for the purposes of section 506 of the Taxes Act and, accordingly, where those profits are the profits of a period which falls partly within and partly outside an accounting period of that company, the necessary apportionment shall be made to determine what proportion of those profits is attributable to that accounting period.

(4) This sub-paragraph applies where—

(a) throughout the accounting period in question all the issued shares of the controlled foreign company are of a single class, and

(b) at the end of that accounting period some of those shares are held by persons resident outside the United Kingdom, and

(c) at no time during that accounting period does any person have an interest in the company other than an interest derived from the issued shares of the company,

and in a case where this sub-paragraph applies the appropriate portion for the purposes of sub-paragraph (1)(c) above is the fraction of which the denominator is the total number of the issued shares of the company at the end of the accounting period in question and, subject to sub-paragraph (8) below, the numerator is the number of those issued shares by virtue of which persons resident in the United Kingdom have interests in the company at that time.

(5) This sub-paragraph applies where—

(a) throughout the accounting period in question there are only two classes of issued shares of the controlled foreign company and, of those classes, one (in this paragraph referred to as " non-voting shares ") consists of non-voting fixed-rate preference shares and the other (in this paragraph referred to as " voting shares ") consists of shares which carry the right to vote in all circumstances at general meetings of the company, and

(b) at the end of that accounting period some of the issued shares of the company are held by persons resident outside the United Kingdom, and

(c) at no time during that accounting period does any person have an interest in the company other than an interest derived from non-voting shares or voting shares,

and in a case where this sub-paragraph applies the appropriate portion of the profits referred to in sub-paragraph (1)(c) above is the amount determined in accordance with sub-paragraph (6) below.

(6) The amount referred to in sub-paragraph (5) above is that given by the formula—

where—

• P is the amount of any dividend falling within paragraphs (a) and (b) of sub-paragraph (1) above which is paid in respect of the non-voting shares or, if there is more than one such dividend, of the aggregate of them;

• Q is, subject to sub-paragraph (8) below, the number of the nonvoting shares by virtue of which persons resident in the United Kingdom have interests in the company at the end of the accounting period in question;

• R is the total number at that time of the issued non-voting shares;

• X is the available profits for the accounting period in question ;

• Y is, subject to sub-paragraph (8) below, the number of voting shares by virtue of which persons resident in the United Kingdom have interests in the company at the end of that accounting period ; and

• Z is the total number at that time of the issued voting shares.

(7) For the purposes of sub-paragraph (5)(a) above, non-voting fixed-rate preference shares are shares—

(a) which are fixed-rate preference shares as defined in paragraph 1 of Schedule 12 to the [1973 c. 51.] Finance Act 1973 ; and

(b) which either carry no right to vote at a general meeting of the company or carry such a right which is contingent upon the non-payment of a dividend on the shares and which has not in fact become exercisable at any time prior to the payment of a dividend for the accounting period in question.

(8) In any case where the immediate interests held by persons resident in the United Kingdom who have indirect interests in a controlled foreign company at the end of a particular accounting period do not reflect the proportion of the shares or, as the case may be, shares of a particular class in the company by virtue of which they have those interests (as in a case where they hold, directly or indirectly, part of the shares in a company which itself holds, directly or indirectly, some or all of the shares in the controlled foreign company) the number of those shares shall be treated as reduced for the purposes of sub-paragraph (4) or, as the case may be, sub-paragraph (6) above to such number as may be appropriate having regard to—

(a) the immediate interests held by the persons resident in the United Kingdom; and

(b) any intermediate shareholdings between those interests and the shares in the controlled foreign company.

(9) The definition of " profits " in section 82(6)(b) of this Act does not apply to any reference in this paragraph to specified profits or to relevant profits for the purposes of section 506 of the Taxes Act

3 (1) Subject to sub-paragraph (2) below, for the purposes of this Part of this Schedule, the available profits of a controlled foreign company for any accounting period shall be ascertained, subject to sub-paragraph (5) below, by—

(a) determining what would be the relevant profits of that period for the purposes of section 506 of the Taxes Act if a dividend were paid for that period ; and

(b) deducting so much of those relevant profits as consists of an excess of capital profits over capital losses.

(2) If, for any accounting period of the controlled foreign company which—

(a) is of less than twelve months' duration, and

(b) is not an accounting period which, but for the coming into operation of this Chapter on 6th April 1984, would have begun before that date and been of at least twelve months' duration,

the available profits, as ascertained under sub-paragraph (1) above, are less than the chargeable profits (determined on the additional assumptions in section 85(3)(a) of this Act), then, if the Board so declare, for the purposes of this Part of this Schedule the available profits for the accounting period shall be those chargeable profits.

(3) The definition of " profits " in section 82(6)(b) of this Act does not apply to the reference in sub-paragraph (1)(a) above to relevant profits for the purposes of section 506 of the Taxes Act

(4) In sub-paragraph (1)(b) above " capital profits " means gains—

(a) which accrue on the disposal of assets ; and

(b) which, if the company were within the charge to corporation tax in respect of the activities giving rise to those disposals, would not be taken into account as receipts in computing the company's income or profits or gains or losses for the purposes of the Income Tax Acts ;

and the expression " capital losses " shall be construed accordingly.

(5) In any case where—

(a) a controlled foreign company pays a dividend for any period out of specified profits, and

(b) those specified profits represent dividends received by the company, directly or indirectly, from another controlled foreign company,

so much of those specified profits as is equal to the dividend referred to in paragraph (a) above shall be left out of account in determining, for the purposes of this Part of this Schedule, the available profits of the controlled foreign company referred to in that paragraph for any accounting period.

4 (1) For the purposes of this Part of this Schedule, where—

(a) a controlled foreign company pays a dividend (in this paragraph referred to as " the initial dividend") to another company which is also not resident in the United Kingdom, and

(b) that other company or another company which is related to it pays a dividend (in this paragraph referred to as " the subsequent dividend ") to a United Kingdom resident, and

(c) the subsequent dividend is paid out of profits which are derived, directly or indirectly, from the whole or part of the initial dividend,

so much of the initial dividend as is represented by the subsequent dividend shall be regarded as paid to the United Kingdom resident

(2) For the purposes of this paragraph, one company is related to another if the other—

(a) controls directly or indirectly, or

(b) is a subsidiary of a company which controls directly or indirectly,

at least 10 per cent. of the voting power in the first-mentioned company ; and where one company is so related to another and that other is so related to a third company, the first company is for the purposes of this paragraph related to the third, and so on where there is a chain of companies, each of which is related to the next

PART II Exempt Activities

5 (1) The provisions of this Part of this Schedule have effect for the purposes of paragraph (b) of subsection (1) of section 83 of this Act.

(2) In the case of a controlled foreign company—

(a) which is, by virtue of section 84(3) of this Act, presumed to be resident in a territory in which it is subject to a lower level of taxation, and

(b) the business affairs of which are, throughout the accounting period in question, effectively managed in a territory outside the United Kingdom other than one in which companies are liable to tax by reason of domicile, residence or place of management,

references in the following provisions of this Part of this Schedule to the territory in which that company is resident shall be construed as references to the territory falling within paragraph (b) above or, if there is more than one, to that one of them which may be notified to the Board by the United Kingdom resident company or companies referred to in paragraph 4(2) of Schedule 16 to this Act.

6 (1) Throughout an accounting period a controlled foreign company is engaged in exempt activities if, and only if, each of the following conditions is fulfilled,—

(a) that, throughout that accounting period, the company has a business establishment in the territory in which it is resident ; and

(b) that, throughout that accounting period, its business affairs in that territory are effectively managed there ; and

(c) that any of sub-paragraphs (2) to (4) below applies to the company.

(2) This sub-paragraph applies to a company if,—

(a) at no time during the accounting period in question does the main business of the company consist of either—

(i) investment business, or

(ii) dealing in goods for delivery to or from the United Kingdom or to or from connected or associated persons ; and

(b) in the case of a company which is mainly engaged in wholesale, distributive or financial business in that accounting period, less than 50 per cent. of its gross trading receipts from that business is derived directly or indirectly from connected or associated persons.

(3) This sub-paragraph applies to a company which is a holding company if at least 90 per cent. of its gross income during the accounting period in question is derived directly from companies which it controls and which, throughout that period,—

(a) are resident in the territory in which the holding company is resident; and

(b) are not themselves holding companies, but otherwise are, in terms of this Schedule, engaged in exempt activities ;

and a holding company to which this sub-paragraph applies is in this Part of this Schedule referred to as a " local holding company ".

(4) This sub-paragraph applies to a company which is a holding company, but not a local holding company, if at least 90 per cent. of its gross income during the accounting period in question is derived directly from companies which it controls and which, throughout that period,—

(a) are local holding companies; or

(b) are not themselves holding companies (whether local or not), but otherwise are, in terms of this Schedule, engaged in exempt activities.

(5) Any reference in sub-paragraph (3) or sub-paragraph (4) above to a company which a holding company controls includes a reference to a trading company in which the holding company holds the maximum amount of ordinary share capital which is permitted under the law of the territory—

(a) in which the trading company is resident; and

(b) from whose laws the trading company derives its status as a company.

(6) The following provisions of this Part of this Schedule have effect in relation to sub-paragraphs (1) to (4) above.

7 (1) For the purposes of paragraph 6(1)(a) above, a " business establishment'', in relation to a controlled foreign company, means premises—

(a) which are, or are intended to be, occupied and used with a reasonable degree of permanence ; and

(b) from which the company's business in the territory in which it is resident is wholly or mainly carried on.

(2) For the purposes of sub-paragraph (1) above, the following shall be regarded as premises,—

(a) an office, shop, factory or other building or part of a building ; or

(b) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources ; or

(c) a building site or the site of a construction or installation project;

but such a site as is referred to in paragraph (c) above shall not be regarded as " premises " unless the building work or the project, as the case may be, has a duration of at least twelve months.

8 (1) Subject to sub-paragraph (4) below, the condition in paragraph 6(1)(b) above shall not be regarded as fulfilled unless—

(a) the number of persons employed by the company in the territory in which it is resident is adequate to deal with the volume of the company's business ; and

(b) any services provided by the company for persons resident outside that territory are not in fact performed in the United Kingdom.

(2) For the purposes of sub-paragraph (1)(a) above, persons who are engaged wholly or mainly in the business of the company and whose remuneration is paid by a person connected with, and resident in the same territory as, the company shall be treated as employed by the company.

(3) In the case of a holding company, sub-paragraph (2) above shall apply with the omission of the words " wholly or mainly ".

(4) For the purposes of sub-paragraph (1)(b) above, no account shall be taken—

(a) of services provided through a branch or agency of the controlled foreign company if the profits or gains of the business carried on through the branch or agency are within the charge to tax in the United Kingdom ; or

(b) of services provided through any other person whose profits or gains from the provision of the services are within the charge to tax in the United Kingdom and who provides the services for a consideration which is, or which is not dissimilar from what might reasonably be expected to be, determined under a contract entered into at arm's length ; or

(c) of services which are no more than incidental to services provided outside the United Kingdom.

9 (1) Subject to sub-paragraph (3) below, for the purposes of paragraph 6(2)(a)(i) above, each of the following activities constitutes investment business,—

(a) the holding of securities, patents or copyrights;

(b) dealing in securities, other than in the capacity of a broker ;

(c) the leasing of any description of property or rights ; and

(d) the investment in any manner of funds which would otherwise be available, directly or indirectly, for investment by or on behalf of any person (whether resident in the United Kingdom or not) who has, or is connected or associated with a person who has, control, either alone or together with other persons, of the controlled foreign company in question.

(2) In sub-paragraph (1)(b) above "broker" includes any person offering to sell securities to, or purchase securities from, members of the public generally.

(3) For the purposes of paragraph 6(2) above, in the case of a company which is mainly engaged in banking or any similar business falling within paragraph 11(1)(c) below, nothing in sub-paragraph (1) above shall require the main business of die company to be regarded as investment business.

10 Goods which are actually delivered into the territory in which the controlled foreign company is resident shall not be taken into account for the purposes of paragraph 6(2)(a)(ii) above.

11 (1) For the purposes of paragraph 6(2)(b) above, each of the following activities constitutes wholesale, distributive or financial business,—

(a) dealing in any description of goods wholesale rather than retail;

(b) the business of shipping or air transport, as defined in section 514(1) of the Taxes Act;

(c) banking or any similar business involving the receipt of deposits, loans or both and the making of loans or investments ;

(d) the administration of trusts;

(e) dealing in securities in the capacity of a broker, as defined in paragraph 9(2) above ;

(f) dealing in commodity or financial futures; and

(g) insurance business which is long-term business or general business, as defined in section 1 of the [1982 c. 50.] Insurance Companies Act 1982.

(2) In a case where the gross trading receipts of a company include an amount in respect of the proceeds of sale of any description of property or rights, the cost to the company of the purchase of that property or those rights shall be a deduction in calculating the company's gross trading receipts for the purposes of paragraph 6(2)(b) above.

(3) In the case of a controlled foreign company engaged in a banking or other business falling within sub-paragraph (1)(c) above, no payment of interest received from a company resident in the United Kingdom shall be regarded for the purposes of paragraph 6(2)(b) above as a receipt derived directly or indirectly from connected or associated persons, but it shall be conclusively presumed that the condition in paragraph 6(2)(b) above is not fulfilled if, at any time during the accounting period in question, the amount by which the aggregate value of the capital interests in the company held directly or indirectly by—

(a) the persons who have control of the company, and

(b) any person connected or associated with those persons,

exceeds the value of the company's fixed assets is 15 per cent. or more of the amount by which the company's outstanding capital exceeds that value.

(4) For the purposes of this paragraph, in relation to a controlled foreign company,—

(a) " capital interest" means an interest in the issued share capital or reserves of the company or in a loan to or deposit with the company or the liability of a guarantor under a guarantee given to or for the benefit of the company;

(b) except in the case of the liability of a guarantor, the value of a capital interest is its value as shown in the company's accounts ;

(c) in the case of the liability of a guarantor, the value shall be taken to be the market value of the benefit which the controlled foreign company derives from the provision of the guarantee ;

(d) the value of the company's fixed assets means the value, as shown in the company's accounts, of the plant, premises and trade investments employed in the company's business ; and

(e) " outstanding capital" means the total value of all the capital interests in the company, less the value, as shown in the company's accounts, of any advances made by the company to persons resident outside the United Kingdom and falling within paragraph (a) or paragraph (b) of sub-paragraph (3) above.

(5) For the purposes of sub-paragraph (4) above—

(a) " trade investments", in relation to a controlled foreign company, means securities any profit on the sale of which would not be brought into account as a trading receipt in computing the chargeable profits of an accounting period in which that profit arose ; and

(b) the reference in paragraph (e) to advances made to a person by the controlled foreign company includes, in the case of a company which is a person resident outside the United Kingdom and falling within paragraph (a) or paragraph (b) of sub-paragraph (3) above, any securities of that company which are held by the controlled foreign company but are not trade investments, as defined in paragraph (a) above ;

and in this sub-paragraph " securities " includes stocks and shares.

(6) In the application of paragraph 6(2)(b) above in the case of a controlled foreign company engaged in insurance business of any kind—

(a) the reference to gross trading receipts which are derived directly or indirectly from connected or associated persons is a reference to those which, subject to sub-paragraph (7) below, are attributable, directly or indirectly, to liabilities undertaken in relation to any of those persons or their property;

(b) the only receipts to be taken into account are commissions and premiums received under insurance contracts;

(c) so much of any such commission or premium as is returned is not to be taken into account; and

(d) when a liability under an insurance contract is reinsured, in whole or in part, the amount of the premium which is attributable, directly or indirectly, to that liability shall be treated as reduced by so much of the premium under the reinsurance contract as is attributable to that liability.

(7) In determining, in relation to a controlled foreign company to which sub-paragraph (6) above applies, the gross trading receipts referred to in paragraph (a) of that sub-paragraph, there shall be left out of account any receipts under a local reinsurance contract which are attributable to liabilities which—

(a) are undertaken under an insurance contract made in the territory in which the company is resident; and

(b) are not reinsured under any contract other than a local reinsurance contract; and

(c) relate either to persons who are resident in that territory and are neither connected nor associated with the company or to property which is situated there and belongs to persons who are not so connected or associated ;

and in paragraph (a) above " insurance contract" does not include a reinsurance contract.

(8) In sub-paragraph (7) above " local reinsurance contract" means a reinsurance contract—

(a) which is made in the territory in which the controlled foreign company is resident; and

(b) the parties to which are companies which are resident in that territory.

(9) For the purposes of sub-paragraphs (7) and (8) above, any question as to the territory in which a company is resident shall be determined in accordance with section 84 of this Act and, where appropriate, paragraph 5(2) above ; and, for the purpose of the application of those provisions in accordance with this sub-paragraph, the company shall be assumed to be a controlled foreign company.

12 (1) Subject to sub-paragraph (2) below, in paragraphs 6 and 8(3) above and sub-paragraphs (4) and (5) below " holding company " means—

(a) a company the business of which consists wholly or mainly in the holding of shares or securities of companies which are either local holding companies and its 90 per cent. subsidiaries or trading companies and either its 51 per cent. subsidiaries or companies falling within paragraph 6(5) above ; or

(b) a company which would fall within paragraph (a) above if there were disregarded so much of its business as consists in the holding of property or rights of any description for use wholly or mainly by companies which it controls and which are resident in the territory in which it is resident.

(2) In determining whether a company is a holding company for the purposes of paragraph 6(3) above (and, accordingly, whether the company is or may be a local holding company), sub-paragraph (1) above shall have effect with the omission from paragraph (a) thereof of the words " either local holding companies and its 90 per cent. subsidiaries or ".

(3) In its application for the purposes of this paragraph, section 532 of the Taxes Act shall have effect with the omission—

(a) from subsection (1)(a) of the words " or indirectly "; and

(b) of subsection (2).

(4) For the purposes of sub-paragraph (3) or, as the case may be sub-paragraph (4) of paragraph 6 above, as it applies in relation to a holding company part of whose business consists of activities other than the holding of shares or securities or the holding of property or rights as mentioned in paragraph (a) or paragraph (b) of sub-paragraph (1) above, the company's gross income during any accounting period shall be determined as follows—

(a) there shall be left out of account so much of what would otherwise be the company's gross income as is derived from any activity which, if it were the business in which the company is mainly engaged, would be such that paragraph 6(2) above would apply to the company ; and

(b) to the extent that the receipts of the company from any other activity include receipts from the proceeds of sale of any description of property or rights, the cost to the company of the purchase of that property or those rights shall (to the extent that the cost does not exceed the receipts) be a deduction in calculating the company's gross income, and no other deduction shall be made in respect of that activity.

(5) For the purposes of sub-paragraphs (3) and (4) of paragraph 6 above, so much of the income of a holding company as—

(a) is derived directly from another company which it controls and which is not a holding company but otherwise is, in terms of this Schedule, engaged in exempt activities, and

(b) was or could have been paid out of any non-trading income of that other company which is derived directly or indirectly from a third company connected or associated with it,

shall be treated, in relation to the holding company, as if it were not derived directly from companies which it controls.

(6) The reference in sub-paragraph (5) above to the non-trading income of a company is a reference to so much of its income as, if the company were carrying on its trade in the United Kingdom, would not be within the charge to corporation tax under Case I of Schedule D.

PART III The Public Quotation Condition

13 (1) The provisions of this Part of this Schedule have effect for the purposes of paragraph (c) of subsection (1) of section 83 of this Act.

(2) Subject to paragraph 14 below, a controlled foreign company fulfils the public quotation condition with respect to a particular accounting period if—

(a) shares in the company carrying not less than 35 per cent. of the voting power in the company (and not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) have been allotted unconditionally to, or acquired unconditionally by, the public and, throughout that accounting period, are beneficially held by the public ; and

(b) within the period of twelve months ending at the end of the accounting period, any such shares have been the subject of dealings on a recognised stock exchange situated in the territory in which the company is resident; and

(c) within that period of twelve months the shares have been quoted in the official list of such a recognised stock exchange.

14 (1) The condition in paragraph 13(2) above is not fulfilled with respect to an accounting period of a controlled foreign company if at any time in that period the total percentage of the voting power in the company possessed by all of the company's principal members exceeds 85 per cent.

(2) For the purposes of paragraph 13(2) above, shares in a controlled foreign company shall be deemed to be beneficially held by the public if they are held by any person other than—

(a) a person connected or associated with the company ; or

(b) a principal member of the company ;

and a corresponding construction shall be given to the reference to shares which have been allotted unconditionally to, or acquired unconditionally by, the public.

15 (1) References in this Part of this Schedule to shares held by any person include references to any shares the rights or powers attached to which could, for the purposes of section 302 of the Taxes Act (meaning of " control") be attributed to that person under subsection (5) of that section (nominees).

(2) For the purposes of this Part of this Schedule—

(a) a person is a principal member of a controlled foreign company if he possesses a percentage of the voting power in the company of more than 5 per cent. and,—

(i) where there are more than five such persons, if he is one of the five persons who possess the greatest percentages, or

(ii) if, because two or more persons possess equal percentages of the voting power in the company, there are no such five persons, he is one of the six or more persons (so as to include those two or more who possess equal percentages) who possess the greatest percentages ; and

(b) a principal member's holding consists of the shares which carry the voting power possessed by him.

(3) In arriving at the voting power which a person possesses, there shall be attributed to him any voting power which, for the purposes of section 302 of the Taxes Act, would be attributed to him under subsection (5) or subsection (6) of that section (nominees, controlled companies and associates).

(4) In this Part of this Schedule " share " includes stock.

PART IV Reductions in United Kingdom Tax and Diversion of Profits

16 (1) The provisions of this Part of this Schedule have effect for the purposes of subsection (3) of section 83 of this Act.

(2) Any reference in paragraphs 17 and 18 below to a transaction—

(a) is a reference to a transaction reflected in the profits arising in an accounting period of a controlled foreign company; and

(b) includes a reference to two or more such transactions taken together.

17 (1) A transaction achieves a reduction in United Kingdom tax if, had the transaction not been effected, any person—

(a) would have been liable for any such tax or for a greater amount of any such tax ; or

(b) would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax.

(2) In this Part of this Schedule and section 83(3) of this Act " United Kingdom tax " means income tax, corporation tax or capital gains tax.

18 It is the main purpose or one of the main purposes of a transaction to achieve a reduction in United Kingdom tax if this is the purpose or one of the main purposes—

(a) of the controlled foreign company concerned ; or

(b) of a person who has an interest in that company at any time during the accounting period concerned.

19 (1) The existence of a controlled foreign company achieves a reduction in United Kingdom tax by a diversion of profits from the United Kingdom in an accounting period if it is reasonable to suppose that, had neither the company nor any company related to it been in existence,—

(a) the whole or a substantial part of the receipts which are reflected in the controlled foreign company's profits in that accounting period would have been received by a company or individual resident in the United Kingdom; and

(b) that company or individual or any other person resident in the United Kingdom either—

(i) would have been liable for any United Kingdom tax or for a greater amount of any such tax ; or

(ii) would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax.

(2) For the purposes of sub-paragraph (1) above, a company is related to a controlled foreign company if—

(a) it is resident outside the United Kingdom; and

(b) it is connected or associated with the controlled foreign company; and

(c) in relation to any company or companies resident in the United Kingdom, it fulfils or could fulfil, directly or indirectly, substantially the same functions as the controlled foreign company.

(3) Any reference in sub-paragraph (1) above to a company resident in the United Kingdom includes a reference to such a company which, if the controlled foreign company in question were not in existence, it is reasonable to suppose would have been established.

Section 89(7).

SCHEDULE 18 RELIEFS AGAINST LIABILITY FOR TA)( IN RESPECT OF CHARGEABLE PROFITS

Trading losses and group relief etc.

1 (1) In any case where—

(a) an amount of chargeable profits is apportioned to a company resident in the United Kingdom, and

(b) the company is entitled, or would on the making of a claim be entitled, in computing its profits for the appropriate accounting period, to a deduction in respect of any relevant allowance, and

(c) for the appropriate accounting period the company has no profits against which a deduction could be made in respect of that allowance or, as the case may be, the amount of that allowance exceeds the profits against which a deduction falls to be made in respect of it,

then, on the making of a claim, a sum equal to corporation tax at the appropriate rate on so much of the relevant allowance or, as the case may be, of the excess of it referred to in paragraph (c) above as is specified in the claim shall be set off against the company's liability to tax under section 82(4)(a) of this Act in respect of the chargeable profits apportioned to it.

(2) In this paragraph—

(a) " the appropriate accounting period " means the accounting period for which, by virtue of section 89(2) of this Act, the company is regarded as assessed to corporation tax in respect of the chargeable profits concerned ; and

(b) "the appropriate rate" means the rate of corporation tax applicable to profits of the appropriate accounting period or, if there is more than one such rate, the average rate over the whole accounting period.

(3) In this paragraph " relevant allowance " means—

(a) any loss to which section 177(2) of the Taxes Act applies ;

(b) any charge on income to which section 248(1) of that Act applies;

(c) any expenses of management to which section 304(1) of that Act applies ;

(d) so much of any allowance to which section 74 of the [1968 c. 3.] Capital Allowances Act 1968 applies as falls within subsection (3) of that section ; and

(e) any amount available to the company by way of group relief.

(4) In any case where, for the appropriate accounting period, an amount would have been available to the company by way of group relief if a claim had been made under section 264 of the Taxes Act, such a claim may be made for the purposes of this paragraph at any time before the end of the accounting period following that in which the assessment under section 82(4)(a) of this Act is made, notwithstanding that the period of two years referred to in section 264(1)(c) of the Taxes Act has expired.

(5) Where, by virtue of sub-paragraph (1) above, a sum is set off against a liability to tax, so much of the relevant allowance as gives rise to the amount set off shall be regarded for the purposes of the Tax Acts as having been allowed as a deduction against the company's profits in accordance with the appropriate provisions of those Acts.

(6) In its application to a claim under this paragraph, section 43 of the [1970 c. 9.] Taxes Management Act 1970 (time limit for making claims) shall have effect as if, in subsection (2),—

(a) any reference to an assessment to income tax were a reference to an assessment under section 82(4)(a) of this Act; and

(b) any reference to a year of assessment were a reference to an accounting period.

Advance corporation tax

2 (1) In any case where—

(a) an amount of chargeable profits is apportioned to a company resident in the United Kingdom, and

(b) the company has an amount of advance corporation tax which, apart from this paragraph, would, in relation to the appropriate accounting period, be surplus advance corporation tax for the purposes of subsection (3) of section 85 of the [1972 c. 41.] Finance Act 1972,

then, on the making of a claim, so much of that advance corporation tax as is specified in the claim and does not exceed the relevant maximum shall be set against the company's liability to tax under section 82(4)(a) of this Act in respect of the chargeable profits apportioned to it, to the extent that that liability has not or could not have been relieved by virtue of paragraph 1 above.

(2) So much of any advance corporation tax as, by virtue of this paragraph, is set against the company's liability to tax under section 82(4)(a) of this Act in respect of chargeable profits shall be regarded for the purposes of the Tax Acts as not being surplus advance corporation tax within the meaning of section 85 of the Finance Act 1972.

(3) In this paragraph " the appropriate accounting period " has the same meaning as in paragraph 1 above and " the relevant maximum ", in relation to the liability to tax referred to in sub-paragraph (1) above, is the amount of advance corporation tax that would have been payable (apart from section 89 of the [1972 c. 41.] Finance Act 1972) in respect of a distribution made at the end of the appropriate accounting period of an amount which, together with the advance corporation tax in respect of it, is equal to—

(a) that amount of the chargeable profits apportioned to the company on which it is chargeable to corporation tax for that accounting period, less

(b) any amount which, for that accounting period, is to be regarded, by virtue of paragraph 1(5) above, as having been allowed as a deduction against the company's profits.

Gains on disposal of shares in controlled foreign company etc.

3 (1) This paragraph applies in any case where—

(a) a direction has been given under section 82(1) of this Act in respect of an accounting period of a controlled foreign company (in this paragraph referred to as "the direction period "); and

(b) the company's chargeable profits for the direction period have been apportioned among the persons referred to in section 82(3) of this Act; and

(c) a company resident in the United Kingdom (in this section referred to as " the claimant company ") disposes of—

(i) shares in the controlled foreign company, or

(ii) shares in another company which, in whole or in part, give rise to the claimant company's interest in the controlled foreign company,

being, in either case, shares acquired before the end of the direction period ; and

(d) by virtue of the apportionment referred to in paragraph (b) above, under section 82(4)(a) of this Act a sum is assessed on and recoverable from the claimant company as if it were an amount of corporation tax ; and

(e) the claimant company makes a claim for relief under this paragraph ;

and in this paragraph the disposal mentioned in paragraph (c) above is referred to as " the relevant disposal".

(2) Subject to the following provisions of this section, in the computation under Chapter II of Part II of the [1979 c. 14.] Capital Gains Tax Act 1979 of the gain accruing on the relevant disposal, the appropriate fraction of the sum referred to in sub-paragraph (1)(d) above shall be allowable as a deduction; but to the extent that any sum has been allowed as a deduction under this sub-paragraph it shall not again be allowed as a deduction on any claim under this paragraph (whether made by the claimant company or another company).

(3) In relation to the relevant disposal, the appropriate fraction means that of which the numerator is the average market value in the direction period of the shares disposed of and the denominator is the average market value in that period of the interest in the controlled foreign company which, in the case of the claimant company, was taken into account in the apportionment referred to in sub-paragraph (1)(b) above.

(4) Where, before the relevant disposal,—

(a) a dividend is paid by the controlled foreign company, and

(b) the profits out of which the dividend is paid are those from which the chargeable profits referred to in sub-paragraph (1)(b) above are derived, and

(c) at least one of the two conditions in sub-paragraph (5) below is fulfilled,

this paragraph does not apply in relation to a sum assessed and recoverable in respect of so much of the chargeable profits as corresponds to the profits which the dividend represents.

(5) The conditions referred to in sub-paragraph (4)(c) above are—

(a) that the effect of the payment of the dividend is such that the value of the shares disposed of by the relevant disposal is less after the payment than it was before it; and

(b) that, in respect of a dividend paid or payable on the shares disposed of by the relevant disposal, the claimant company is, by virtue of paragraph 4(2) below, entitled under Part XVIII of the Taxes Act to relief (by way of underlying tax) by reference to sums which include the sum referred to in sub-paragraph (1)(d) above.

(6) A claim for relief under this paragraph shall be made before the expiry of the period of three months beginning—

(a) at the end of the accounting period in which the relevant disposal occurs ; or

(b) if it is later, on the date on which the assessment to tax for which the claimant company is liable by virtue of section 82(4)(a) of this Act becomes final and conclusive.

(7) In identifying for the purposes of this paragraph shares in a company with shares of the same class which are disposed of by the relevant disposal, shares acquired at an earlier time shall be deemed to be disposed of before shares acquired at a later time.

Dividends from the controlled foreign company

4 (1) This paragraph applies in any case where—

(a) a direction has been given under section 82(1) of this Act in respect of an accounting period of a controlled foreign company, and

(b) the company's chargeable profits for that period have been apportioned among the persons referred to in section 82(3) of this Act, and

(c) the controlled foreign company pays a dividend in whole or in part out of the total profits from which (in accordance with section 82(6)(a) of this Act) those chargeable profits are derived.

(2) Subject to paragraphs 5 and 6 below, where this paragraph applies, the aggregate of the sums assessed on and recoverable from companies resident in the United Kingdom in accordance with section 82(4)(a) of this Act in respect of the chargeable profits referred to in sub-paragraph (1)(b) above shall be treated for the purposes of Part XVIII of the Taxes Act (double taxation relief) as if it were an amount of tax paid in respect of the profits concerned under the law of the territory in which the controlled foreign company was resident and, accordingly, as underlying tax for the purposes of Chapter II of that Part.

(3) In the following provisions of this paragraph and in paragraphs 5 and 6 below the aggregate of the sums which, under sub-paragraph (2) above, fall to be treated as underlying tax is referred to as the " gross attributed tax ".

(4) If, in the case of a person who receives the dividend, section 504 or section 505 of the Taxes Act (1imit on credit) has the effect of reducing the amount which (apart from that section) would have been the amount of the credit for foreign tax which is to be allowed to that person, then, for the purposes of sub-paragraph (5) below, the amount of that reduction shall be determined and so much of it as does not exceed the amount of the foreign tax, exclusive of underlying tax, for which credit is to be allowed in respect of the dividend is in that sub-paragraph referred to as " the wasted relief ".

(5) Except for the purpose of determining the amount of the wasted relief, the gross attributed tax shall be treated as reduced by the aggregate of the wasted relief arising in the case of all the persons falling within sub-paragraph (4) above and, on the making of a claim by any of the companies referred to in sub-paragraph (2) above,—

(a) the sum assessed on and recoverable from the company in accordance with section 82(4)(a) of this Act in respect of the chargeable profits referred to in sub-paragraph (1)(b) above shall, where appropriate, be reduced ; and

(b) all such adjustments (whether by repayment of tax or otherwise) shall be made as are appropriate to give effect to any reduction under paragraph (a) above.

5 (1) In so far as any provision of—

(a) arrangements having effect by virtue of section 497 of the Taxes Act (relief by agreement with other countries), or

(b) section 498 of that Act (unilateral relief),

makes relief which is related to foreign dividends received by a company resident in the United Kingdom conditional upon that company either having a particular degree of control of the company paying the dividend or being a subsidiary of another company which has that degree of control, that condition shall be treated as fulfilled in considering whether any such company is by virtue of paragraph 4(2) above entitled to relief under Part XVIII of that Act in respect of any of the gross attributed tax.

(2) Notwithstanding anything in paragraph 4(2) above, in section 503(2)(b) of the Taxes Act (income from dividends treated as increased by underlying tax) the expression "underlying tax" does not include gross attributed tax.

(3) In a case where the controlled foreign company pays a dividend otherwise than out of specified profits and, on the apportionment referred to in paragraph 4(1) above, less than the whole of the chargeable profits of the controlled foreign company concerned is apportioned to companies which are resident in the United Kingdom and liable for tax thereon as mentioned in section 82(4)(a) of this Act,—

(a) the gross attributed tax shall be regarded as attributable to a corresponding proportion of the profits in question, and in this sub-paragraph the profits making up that proportion are referred to as " taxed profits " ;

(b) so much of the dividend as is received by, or by a successor in title of, any such company shall be regarded as paid primarily out of taxed profits ; and

(c) so much of the dividend as is received by any other person shall be regarded as paid primarily out of profits which are not taxed profits.

(4) The reference in sub-paragraph (3)(b) above to a successor in title of a company resident in the United Kingdom is a reference to a person who is such a successor in respect of the whole or any part of that interest in the controlled foreign company by virtue of which an amount of its chargeable profits was apportioned to that company.

6 (1) In any case where—

(a) on a claim for relief under paragraph 3 above, the whole or any part of any sum has been allowed as a deduction on a disposal of shares in any company, and

(b) that sum forms part of the gross attributed tax in relation to a dividend paid by that company, and

(c) a person receiving the dividend in respect of the shares referred to in paragraph (a) above (in this paragraph referred to as " the primary dividend ") or any other relevant dividend is, by virtue of paragraph 4(2) above, entitled under Part XVIII of the Taxes Act to relief (by way of underlying tax) by reference to the whole or any part of the gross attributed tax,

the amount which, apart from this paragraph, would be available by way of such relief to the person referred to in paragraph (c) above shall be reduced or, as the case may be, extinguished by deducting therefrom the amount allowed by way of relief as mentioned in paragraph (a) above.

(2) For the purposes of sub-paragraph (1)(c) above, in relation to the primary dividend, another dividend is a relevant dividend if—

(a) it is a dividend in respect of shares in a company which is resident outside the United Kingdom; and

(b) it represents profits which, directly or indirectly, consist of or include the primary dividend.

Section 95.

SCHEDULE 19 DISTRIBUTING FUNDS

PART I The Distribution Test

Requirements as to distributions

1 (1) For the purposes of this Chapter, an offshore fund pursues a full distribution policy with respect to an account period if—

(a) a distribution is made for that account period or for some other period which, in whole or in part, falls within that account period; and.

(b) subject to Part II of this Schedule, the amount of the distribution which is paid to the holders of material and other interests in the fund—

(i) represents at least 85 per cent. of the income of the fund for that period, and

(ii) is not less than 85 per cent. of the fund's United Kingdom equivalent profits for that period ; and

(c) the distribution is made during that account period or not more than six months after the expiry of it; and

(d) the form of the distribution is such that, if any sum forming part of it were received in the United Kingdom by a person resident there and did not form part of the profits of a trade, profession or vocation, that sum would fall to be chargeable to tax under Case IV or Case V of Schedule D ;

and any reference in this sub-paragraph to a distribution made for an account period includes a reference to any two or more distributions so made or, in the case of paragraph (b), the aggregate of them.

(2) Subject to sub-paragraph (3) below, with respect to any account period for which—

(a) there is no income of the fund, and

(b) there are no United Kingdom equivalent profits of the fund,

the fund shall be treated as pursuing a full distribution policy notwithstanding that no distribution is made as mentioned in sub-paragraph (1) above.

(3) For the purposes of this Chapter, an offshore fund shall be regarded as not pursuing a full distribution policy with respect to an account period for which the fund does not make up accounts.

(4) For the purposes of this paragraph—

(a) where a period for which an offshore fund makes up accounts includes the whole or part of two or more account periods of the fund, then, subject to paragraph (c) below, income shown in those accounts shall be apportioned between those account periods on a time basis according to the number of days in each period which are comprised in the period for which the accounts are made up ;

(b) where a distribution is made for a period which includes the whole or part of two or more account periods of the fund, then, subject to sub-paragraph (5) below, the distribution shall be apportioned between those account periods on a time basis according to the number of days in each period which are comprised in the period for which the distribution is made;

(c) where a distribution is made out of specified income but is not made for a specified period, that income shall be attributed to the account period of the fund in which it in fact arose and the distribution shall be treated as made for that account period ; and

(d) where a distribution is made neither for a specified period nor out of specified income, then, subject to sub-paragraph (5) below, it shall be treated as made for the last account period of the fund which ended before the distribution was made.

(5) If, apart from this sub-paragraph, the amount of a distribution made, or treated by virtue of sub-paragraph (4) above as made, for an account period would exceed the income of that period, then, for the purposes of this paragraph,—

(a) if the amount of the distribution was determined by apportionment under sub-paragraph (4)(b) above, the excess shall be re-apportioned, as may be just and reasonable, to any other account period which, in whole or in part, falls within the period for which the distribution was made or, if there is more than one such period, between those periods ; and

(b) subject to paragraph (a) above, the excess shall be treated as an additional distribution or series of additional distributions made for preceding account periods in respect of which the distribution or, as the case may be, the aggregate distributions would otherwise be less than the income of the period, applying the excess to later account periods before earlier ones, until it is exhausted.

(6) In any case where—

(a) for a period which is or includes an account period, an offshore fund is subject to any restriction as regards the making of distributions, being a restriction imposed by the law of any territory outside the United Kingdom, and

(b) the fund is subject to that restriction by reason of an excess of losses over profits (applying the concepts of " profits " and " losses " in the sense in which and to the extent to which they are relevant for the purposes of the law in question),

then, in determining, for the purposes of the preceding provisions of this paragraph, the amount of the fund's income for that account period, there shall be allowed as a deduction any amount which, apart from this sub-paragraph, would form part of the income of the fund for that account period and which cannot be distributed by virtue of the restriction.

Funds operating equalisation arrangements

2 (1) In the case of an offshore fund which throughout any account period operates equalisation arrangements, on any occasion in that period when there is a disposal to which this sub-paragraph applies, the fund shall be treated for the purposes of this Part of this Schedule as making a distribution of an amount equal to so much of the consideration for the disposal as, in accordance with this paragraph, represents income accrued to the date of the disposal.

(2) Sub-paragraph (1) above applies to a disposal—

(a) which is a disposal of a material interest in the offshore fund concerned; and

(b) which is a disposal to which this Chapter applies (whether by virtue of subsection (3) of section 93 of this Act or otherwise) or is one to which this Chapter would apply if subsections (5) and (6) of that section applied generally and not only for the purpose of determining whether, by virtue of subsection (3) of that section, there is a disposal to which this Chapter applies; and

(c) which is not a disposal with respect to which the conditions in subsection (4) of that section are fulfilled ; and

(d) which is a disposal to the fund itself or to the persons concerned with the management of the fund (in this paragraph referred to as " the managers ") in their capacity as such.

(3) On a disposal to which sub-paragraph (1) above applies, the part of the consideration which represents income accrued to the date of the disposal is, subject to sub-paragraph (4) and paragraph 4(4) below, the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if, on the date of the disposal, the material interest which is disposed of were acquired by another person by way of initial purchase.

(4) If, after the beginning of the period by reference to which the accrued income referred to in sub-paragraph (3) above is calculated, the material interest disposed of by a disposal to which sub-paragraph (1) above applies was acquired by way of initial purchase (whether or not by the person making the disposal), there shall be deducted from the amount which, in accordance with sub-paragraph (3) above, would represent income accrued to the date of the disposal, the amount which on that acquisition was credited to the equalisation account of the fund in respect of accrued income ; and if in that period there has been more than one such acquisition of that material interest by way of initial purchase, the deduction to be made under this sub-paragraph shall be the amount so credited to the equalisation account on the latest such acquisition prior to the disposal in question.

(5) Where, by virtue of this paragraph, an offshore fund is treated for the purposes of this Part of this Schedule as making a distribution on the occasion of a disposal, the distribution shall be treated for those purposes—

(a) as complying with paragraph 1(1)(d) above ; and

(b) as made out of the income of the fund for the account period in which the disposal occurs ; and

(c) as paid, immediately before the disposal, to the person who was then the holder of the interest disposed of.

(6) In any case where—

(a) a distribution in respect of an interest in an offshore fund is made to the managers of the fund, and

(b) their holding of that interest is in their capacity as such, and

(c) at the time of the distribution, the fund is operating equalisation arrangements,

the distribution shall not be taken into account for the purposes of paragraph 1(1) above except to the extent that the distribution is properly referable to that part of the period for which the distribution is made during which that interest has been held by the managers of the fund in their capacity as such.

(7) Subsection (2) of section 93 applies for the purposes of this paragraph as it applies for the purposes of that section.

Income taxable under Case IV or Case V of Schedule D

3 (1) Sub-paragraph (2) below applies if any sums which form part of the income of an offshore fund falling within paragraph (b) or paragraph (c) of subsection (1) of section 94 of this Act are of such a nature that—

(a) the holders of interests in the fund who are either companies resident in the United Kingdom or individuals domiciled and resident there—

(i) are chargeable to tax under Case IV or Case V of Schedule D in respect of such of those sums as are referable to their interests ; or

(ii) if any of that income is derived from assets within the United Kingdom, would be so chargeable had the assets been outside the United Kingdom ; and

(b) the holders of interests who are not such companies or individuals would be chargeable as mentioned in sub-paragraph (i) or sub-paragraph (ii) above if they were resident in the United Kingdom or, in the case of individuals, if they were domiciled and both resident and ordinarily resident there.

(2) To the extent that sums falling within sub-paragraph (1) above do not actually form part of a distribution complying with paragraphs 1(1)(c) and 1(1)(d) above, they shall be treated for the purposes of this Part of this Schedule—

(a) as a distribution complying with those paragraphs and made out of the income of which they form part; and

(b) as paid to the holders of the interests to which they are referable.

Commodity income

4 (1) To the extent that the income of an offshore fund for any account period includes profits from dealing in commodities, one half of those profits shall be left out of account in determining for the purposes of paragraphs 1(1)(b) above and 5 below—

(a) the income of the fund for that period ; and

(b) the fund's United Kingdom equivalent profits for that period;

but in any account period in which an offshore fund incurs a loss in dealing in commodities the amount of that loss shall not be varied by virtue of this paragraph.

(2) In this paragraph, " dealing in commodities" shall be construed as follows—

(a) " commodities " does not include currency, securities, debts or other assets of a financial nature but, subject to that, means tangible assets which are dealt with on a commodity exchange in any part of the world ; and

(b) " dealing" includes dealing by way of futures contracts and traded options.

(3) Where the income of an offshore fund for any account period consists of profits from dealing in commodities and other income then,—

(a) in determining whether the condition in paragraph 1(1)(b) above is fulfilled with respect to that account period, the expenditure of the fund shall be apportioned in such manner as is just and reasonable between the profits from dealing in commodities and the other income ; and

(b) in determining whether, and to what extent, any expenditure is deductible under section 304 of the Taxes Act (management expenses of investment companies) in computing the fund's United Kingdom equivalent profits for that period, so much of the business of the fund as does not consist of dealing in commodities shall be treated as a business carried on by a separate company.

(4) Where there is a disposal to which sub-paragraph (1) of paragraph 2 above applies, then, to the extent that any amount which was or would be credited to the equalisation account in respect of accrued income, as mentioned in sub-paragraph (3) or sub-paragraph (4) of that paragraph, represents profits from dealing in commodities, one half of that accrued income shall be left out of account in determining under those sub-paragraphs the part of the consideration for the disposal which represents income accrued to the date of the disposal.

United Kingdom equivalent profits

5 (1) Any reference in this Schedule to the United Kingdom equivalent profits of an offshore fund for an account period is a reference to the amount which, on the assumptions in sub-paragraph (3) below, would be the total profits of the fund for that period on which, after allowing for any deductions available against those profits, corporation tax would be chargeable.

(2) In this paragraph the expression " profits " does not include chargeable gains.

(3) The assumptions referred to in sub-paragraph (1) above are—

(a) that the offshore fund is a company which, in the account period in question, but not in any other account period, is resident in the United Kingdom ; and

(b) that the account period is an accounting period of that company ; and

(c) that any dividends or distributions which, by virtue of section 239 of the Taxes Act (dividends and distributions of companies resident in the United Kingdom), should be left out of account in computing income for corporation tax purposes are nevertheless to be brought into account in that computation in like manner as if they were dividends or distributions of a company resident outside the United Kingdom.

(4) Without prejudice to any deductions available apart from this sub-paragraph, the deductions referred to in sub-paragraph (1) above include—

(a) a deduction equal to any amount which, by virtue of paragraph 1(6) above, is allowed as a deduction in determining the income of the fund for the account period in question; and

(b) a deduction equal to any amount of tax (paid under the law of a territory outside the United Kingdom) which was taken into account as a deduction in determining the income of the fund for the account period in question but which, because it is referable to capital rather than income, does not fall to be taken into account by virtue of section 516 of the Taxes Act.

(5) For the avoidance of doubt it is hereby declared that, if any sums forming part of the offshore fund's income for any period have been received by the fund without any deduction of or charge to tax by virtue of section 99 or section 100 of the Taxes Act (securities held by non-residents), the effect of the assumption in sub-paragraph (3)(a) above is that those sums are to be brought into account in determining the total profits referred to in sub-paragraph (1) above.

PART II Modifications of Conditions For Certification in Certain Cases

Exclusion of investments in distributing offshore funds

6 (1) In any case where—

(a) in an account period of an offshore fund (in this Part of this Schedule referred to as the " primary fund"), the assets of the fund consist of or include interests in another offshore fund, and

(b) those interests (together with other interests which the primary fund may have) are such that, by virtue of paragraph (a) of subsection (3) of section 95 of this Act or, if the other fund concerned is a company, by virtue of paragraph (b) or paragraph (c) of that subsection, the primary fund could not, apart from this paragraph, be certified as a distributing fund in respect of that account period, and

(c) without regard to the provisions of this paragraph, that other fund could be certified as a distributing fund in respect of its account period or, as the case may be, each of its account periods which comprises the whole or any part of the account period of the primary fund,

then, in determining whether anything in paragraphs (a) to (c) of the said subsection (3) prevents the primary fund being certified as mentioned in paragraph (b) above, the interests of the primary fund in that other fund shall be left out of account except for the purpose of determining the total value of the assets of the primary fund.

(2) In this Part of this Schedule an offshore fund falling within sub-paragraph (1)(c) above is referred to as a " qualifying fund".

(3) In a ease falling within sub-paragraph (1) above—

(a) paragraphs (a) to (c) of subsection (3) of section 95 of this Act shall have effect in relation to the primary fund with the modification in paragraph 7 below (in addition to that provided for by sub-paragraph (1) above); and

(b) Part I of this Schedule shall have effect in relation to the primary fund with the modification in paragraph 8 below.

7 The modification referred to in paragraph 6(3)(a) above is that, in any case where—

(a) at any time in the account period referred to in paragraph 6(1) above, the assets of the primary fund include an interest in an offshore fund or in any company (whether an offshore fund or not), and

(b) that interest falls to be taken into account in determining whether anything in paragraphs (a) to (c) of subsection (3) of section 95 of this Act prevents the primary fund being certified as a distributing fund in respect of that account period, and

(c) at any time in that account period the assets of the qualifying fund include an interest in the offshore fund or company referred to in paragraph (a) above,

for the purpose of the application in relation to the primary fund of the provisions referred to in paragraph (b) above, at any time when the assets of the qualifying fund include the interest referred to in paragraph (c) above, the primary fund's share of that interest shall be treated as an additional asset of the primary fund.

8 (1) The modification referred to in paragraph 6(3)(b) above is that, in determining whether the condition in paragraph 1(1)(b)(ii) above is fulfilled with respect to the account period of the primary fund referred to in paragraph 6(1) above, the United Kingdom equivalent profits of the primary fund for that period shall be treated as increased by the primary fund's share of the excess income (if any) of the qualifying fund which is attributable to that period.

(2) For the purposes of this paragraph, the excess income of the qualifying fund for any account period of that fund is the amount (if any) by which its United Kingdom equivalent profits for that account period exceed the amount of the distributions made for that period, as determined for the purposes of the application of paragraph 1(1) above to the qualifying fund.

(3) If an account period of the qualifying fund coincides with an account period of the primary fund, then the excess income (if any) of the qualifying fund for that period is the excess income which is attributable to that period of the primary fund.

(4) In a case where sub-paragraph (3) above does not apply, the excess income of the qualifying fund which is attributable to an account period of the primary fund is the appropriate fraction of the excess income (if any) of the qualifying fund for any of its account periods which comprises the whole or any part of the account period Of the primary fund and, if there is more than one such account period of the qualifying fund, the aggregate of the excess income (if any) of each of them.

(5) For the purposes of sub-paragraph (4) above, the appropriate fraction is that of which—

(a) the numerator is the number of days in the account period of the primary fund which are also days in an account period of the qualifying fund ; and

(b) the denominator is the number of days in that account period of the qualifying fund or, as the case may be, in each of those account periods of that fund which comprises the whole or any part of the account period of the primary fund.

9 (1) The references in paragraphs 7 and 8(1) above to the primary fund's share of—

(a) an interest forming part of the assets of the qualifying fund, or

(b) the excess income (as defined in paragraph 8 above) of the qualifying fund,

shall be construed as references to the fraction specified in sub-paragraph (2) below of that interest or excess income.

(2) In relation to any account period of the primary fund, the fraction referred to in sub-paragraph (1) above is that of which—

(a) the numerator is the average value of the primary fund's holding of interests in the qualifying fund during that period; and

(b) the denominator is the average value of all the interests in the qualifying fund held by any persons during that period.

Offshore funds investing in trading companies

10 (1) In any case where the assets of an offshore fund for the time being include an interest in a trading company, as defined in sub-paragraph (2) below, the provisions of subsection (3) of section 95 of this Act nave effect subject to the modifications in sub-paragraphs (3) and (4) below.

(2) In this paragraph " trading company " means a company whose business consists wholly of the carrying on of a trade or trades and does not to any extent consist of—

(a) dealing in commodities, as defined in paragraph 4(2) above, or dealing, as so defined, in currency, securities, debts or other assets of a financial nature ; or

(b) banking or money-lending.

(3) In the application of section 95(3)(b) of this Act to so much of the assets of an offshore fund as for the time being consists of interests in a single trading company, for the words " 10 per cent. " there shall be substituted the words " 20 per cent. "

(4) In the application of section 95(3)(c) of this Act to an offshore fund the assets of which for the time being include any issued share capital of a trading company or any class of that share capital, for the words " more than 10 per cent." there shall be substituted the words " 50 per cent. or more ".

Offshore funds with wholly-owned subsidiaries dealing in commodities

11 (1) In relation to an offshore fund which has a wholly-owned subsidiary—

(a) which is a company, and

(b) the business of which consists wholly or mainly of dealing in commodities, as defined in paragraph 4(2) above,

the provisions of subsection (3) of section 95 of this Act and Part I of this Schedule have effect subject to the modifications in sub-paragraph (3) below.

(2) For the purposes of this paragraph, a company is a wholly-owned subsidiary of an offshore fund if and so long as the whole of the issued share capital of the company is,—

(a) in the case of an offshore fund falling within section 94(1)(a) of this Act, directly and beneficially owned by the fund ; and

(b) in the case of an offshore fund falling within section 94(1)(b) of this Act, directly owned by the trustees of the fund for the benefit of the fund ; and

(c) in the case of an offshore fund falling within section 94(1)(c) of this Act, owned in a manner which, as near as may be, corresponds either to paragraph (a) or paragraph (b) above.

(3) The modifications referred to in sub-paragraph (1) above are that, for the purposes of the provisions referred to in that sub-paragraph,—

(a) the receipts, expenditure, assets and liabilities of the subsidiary shall be regarded as the receipts, expenditure, assets and liabilities of the fund ; and

(b) there shall be left out of account the interest of the fund in the subsidiary and any distributions or other payments made by the subsidiary to the fund or by the fund to the subsidiary.

Offshore funds with interests in dealing and management companies

12 (1) Section 95(3)(c) of this Act shall not apply to so much of the assets of an offshore fund as consists of issued share capital of a company which is either—

(a) a wholly-owned subsidiary of the fund which falls within sub-paragraph (2) below, or

(b) a subsidiary management company of the fund, as defined in sub-paragraph (3) below.

(2) A company which is a wholly-owned subsidiary of an offshore fund is one to which sub-paragraph (1)(a) above applies if—

(a) the business of the company consists wholly of dealing in material interests in the offshore fund for the purposes of and in connection with the management and administration of the business of the fund ; and

(b) the company is not entitled to any distribution in respect of any material interest for the time being held by it;

and paragraph 11(2) above shall apply to determine whether a company is, for the purposes of this paragraph, a wholly-owned subsidiary of an offshore fund.

(3) A company in which an offshore fund has an interest is for the purposes of sub-paragraph (1)(b) above a subsidiary management company of the fund if—

(a) the company carries on no business other than providing services falling within sub-paragraph (4) below either for the fund alone or for the fund and for any other offshore fund which has an interest in the company ; and

(b) the company's remuneration for the services which it provides to the fund is not greater than it would be if it were determined at arm's length between the fund and a company in which the fund has no interest.

(4) The services referred to in sub-paragraph (3) above are—

(a) holding property (of any description) which is occupied or used in connection with the management or administration of the fund ; and

(b) providing administrative, management and advisory services to the fund.

(5) In determining, in accordance with sub-paragraph (3) above, whether a company in which an offshore fund has an interest is a subsidiary management company of that fund,—

(a) every business carried on by a wholly-owned subsidiary of the company shall be treated as carried on by the Company ; and

(b) no account shall be taken of so much of the company's business as Consists of holding its interests in a wholly-owned Subsidiary; and

(c) any reference in sub-paragraph (3)(b) above to the company shall be taken to include a reference to a wholly-owned subsidiary of the company.

(6) Any reference in sub-paragraph (5) above to a wholly-owned subsidiary of a company is a reference to another company the whole of the issued share capital of which is for the time being directly and beneficially owned by the first company.

PART III Certification Procedure

Application for Certification

13 (1) The Board shall, in such manner as they think appropriate, certify an offshore fund as a distributing fund in respect of an account period if—

(a) an application in respect of that period is made under this paragraph; and

(b) the application is accompanied by the accounts of the fund for, or for a period which includes, the account period to which the application relates ; and

(c) there is furnished to the Board such information as they may reasonably require for the purpose of determining whether the fund should be so certified ; and

(d) they are satisfied that nothing in subsection (2) or subsection (3) of section 95 of this Act prevents the fund being so certified.

(2) An application under this paragraph shall be made to the Board by the fund or by a trustee or officer thereof on behalf of the fund and may be so made—

(a) before the expiry of the period of six months beginning at the end of the account period to which the application relates; or

(b) if it is later, before 1st January 1985 ; or

(c) at Such later time as the Board may in any particular case allow.

(3) In any case where, on an application under this paragraph, the Board determine that the offshore fund concerned should not be certified as a dittoing fund in respect of the account period to which the application relates, they shall give notice in writing of that fact to the fund.

(4) If at any time it appears to the Board that the accounts accompanying an application under this paragraph in respect of any account period of an offshore fund or any information furnished to the Board in connection with such an application is or are not such as to make full and accurate disclosure of all facts and considerations relevant to the application, they shall give notice to the fund accordingly, specifying the period concerned.

(5) Where a notice is given by the Board under sub-paragraph (4) above, any certification by them in respect of the account period in question shall be void.

Appeals

14 (1) An appeal to the Special Commissioners—

(a) against such a determination as is referred to in paragraph 13(3) above, or

(b) against a notification under paragraph 13(4) above,

may be made by the offshore fund or by a trustee or officer thereof on behalf of the fund, and shall be so made by notice in writing specifying the grounds of appeal and given to the Board within 90 days of the date of the notice under paragraph 13(3) or, as the ease may be, paragraph 13(4) above.

(2) The jurisdiction of the Special Commissioners on an appeal under this paragraph shall include jurisdiction to review any decision of the Board which is relevant to a ground of the appeal.

PART IV Supplementary

Assessment: effect of non-certification

15 No appeal may be brought against an assessment to tax on the ground that an offshore fund should have been certified as a distributing fund in respect of an account period of the fund.

16 (1) Without prejudice to paragraph 15 above, in any case where no application has been made under paragraph 13 above in respect of an account period of an offshore fund, any person who is assessed to tax for which he would not be liable if the offshore fund were certified as a distributing fund in respect of that period may by notice in writing require the Board to take action under this paragraph with a view to determining whether the fund should be so certified.

(2) Subject to sub-paragraphs (3) and (5) below, if the Board receive a notice under sub-paragraph (1) above, they shall, by notice in writing, invite the offshore fund concerned to make an application under paragraph 13 above in respect of the period in question.

(3) Where sub-paragraph (2) above applies, the Board shall not be required to give notice under that sub-paragraph before the expiry of the account period to which the notice is to relate nor if an application under paragraph 13 above has already been made; but where notice is given under that sub-paragraph, an application under paragraph 13 above shall not be out of time under paragraph 13(2)(a) or paragraph 13(2)(b) above if it is made within 90 days of the date of that notice.

(4) If an offshore fund to which notice in writing is given under sub-paragraph (2) above does not, within the time allowed by sub-paragraph (3) above or, as the case may be, paragraph 13(2)(a) or paragraph 13(2)(b) above, make an application under paragraph 13 above in respect of the account period in question, the Board shall proceed to determine the question of certification in respect of that period as if such an application had been made.

(5) Where the Board receive more than one notice under sub-paragraph (1) above with respect to the same account period of the same offshore fund, their obligations under sub-paragraphs (2) and (4) above shall be taken to be fulfilled with respect to each of those notices if they are fulfilled with respect to any one of them.

(6) Notwithstanding anything in sub-paragraph (5) above, for the purpose of a determination under sub-paragraph (4) above with respect to an account period of an offshore fund, the Board shall have regard to accounts and other information furnished by all persons who have given notice under sub-paragraph (1) above with respect to that account period ; and paragraph 13 above shall apply as if accounts and information so furnished had been furnished in compliance with sub-paragraph (1) of that paragraph.

(7) Without prejudice to sub-paragraph (5) above, in any case where—

(a) at a time after the Board have made a determination under sub-paragraph (4) above that an offshore fund should not be certified as a distributing fund in respect of an account period, notice is given under sub-paragraph (1) above with respect to that period, and

(b) the person giving that notice furnishes the Board with accounts or information which had not been furnished to the Board at the time of the earlier determination,

the Board shall reconsider their previous determination in the light of the new accounts or information and, if they consider it appropriate, may determine to certify the fund accordingly.

(8) Where any person has given notice to the Board under sub-paragraph (1) above with respect to an account period of an offshore fund and no application has been made under paragraph 13 above with respect to that period,—

(a) the Board shall notify that person of their determination with respect to certification under sub-paragraph (4) above ; and

(b) paragraph 14 above shall not apply in relation to that determination.

Postponement of tax pending determination of question as to certification

17 (1) In any case where—

(a) an application has been made under paragraph 13 above with respect to an account period of an offshore fund and that application has not been finally determined, or

(b) paragraph (a) above does not apply but notice has been given under paragraph 16(1) above in respect of an account period of an offshore fund and the Board have not yet given notice of their decision as to certification under paragraph 16(4) above,

any person who has been assessed to tax and considers that, if the offshore fund were to be certified as a distributing fund in respect of the account period in question, he would be overcharged to tax by the assessment may, by notice in writing given to the inspector within 30 days after the date of the issue of the notice of assessment, apply to the General Commissioners for a determination of the amount of tax the payment of which should be postponed pending the determination of the question whether the fund should be so certified.

(2) A notice of application under sub-paragraph (1) above shall state the amount in which the applicant believes that he is overcharged to tax and his grounds for that belief.

(3) Subsections (3A) onwards of section 55 of the [1970 c. 9.] Taxes Management Act 1970 (recovery of tax not postponed) shall apply with any necessary modifications in relation to an application under sub-paragraph (1) above as if it were an application under subsection (3) of that section and as if the determination of the question as to certification (whether by the Board or on appeal) were the determination of an appeal.

Information as to decisions on certification etc.

18 No obligation as to the secrecy imposed by statute or otherwise shall preclude the Board or an inspector from disclosing to any person appearing to have an interest in the matter—

(a) any determination of the Board or (on appeal) the Special Commissioners whether an offshore fund should or should not be certified as a distributing fund in respect of any account period; or

(b) the content and effect of any notice given by the Board under paragraph 13(4) above.

Section 96.

SCHEDULE 20 COMPUTATION OF OFFSHORE INCOME GAINS

PART I Disposals of Interests in Non-Qualifying Funds

Interpretation

1 In this Part of this Schedule—

• " the principal Act" means the [1979 c. 14.] Capital Gains Tax Act 1979 ;

• " the principal section " means section 96 of this Act; and

• "material disposal" means a disposal to which Chapter VII of Part II of this Act applies, otherwise than by virtue of section 93(3) of this Act.

Calculation of unindexed gain

2 (1) Where there is a material disposal, there Shall first be determined for the purposes of this Part of this Schedule the amount (if any) which, in accordance with the provisions of this paragraph, is the unindexed gain accruing to the person making the disposal.

(2) Subject to subsections (3) to (6) of section 92 of this Act and paragraph 3 below, the unindexed gain accruing on a material disposal is the amount which would be the gain on that disposal for the purposes of the principal Act if it were computed—

(a) without regard to any charge to income tax or corporation tax by virtue of the principal section; and

(b) without regard to any indexation allowance on the disposal under Chapter III of Part III of the [1982 c. 39.] Finance Act 1982.

3 (1) if the amount of any chargeable gain or allowable loss which (apart from section 98 of this Act) would accrue on the material disposal would fall to be determined in a way which, in whole or in part, would take account of the indexation allowance on an earlier disposal to which paragraph 2 of Schedule 13 to the Finance Act 1982 applies (disposals on a no-gain/no-loss basis), the unindexed gain on the material disposal shall be computed as if—

(a) no indexation allowance had been available on any such earlier disposal; and

(b) subject to that, neither a gain nor a loss had accrued to the person making such an earlier disposal.

(2) If the material disposal forms part of a transfer to which Section 123 of the principal Act applies (roll-over relief on transfer of business), the unindexed gain accruing on the disposal Shall be computed without regard to any deduction which falls to be made under that section in computing a chargeable gain.

(3) If the material disposal is made otherwise than under a bar-gam at arm's length and a claim for relief is made in respect of that disposal under section 79 of the [1980 c. 48.] Finance Act 1980 (relief for gifts), that section shall not affect the computation of the unindexed gain accruing on the disposal.

(4) Where, in the case of an insurance company carrying on life assurance business, a profit arising from general annuity business and attributable to a material disposal falls (or would but for section 99(2) of this Act fall) to be taken into account in the computation under section 312 of the Taxes Act (general annuity business and pension business: separate charge on profits), the unindexed gain, if any, accruing to the company on the disposal shall be computed as if section 31(1) of the principal Act (computation of chargeable gains: exclusion of sums taken into account in computing income) did not apply.

(5) Notwithstanding section 29 of the principal Act (losses to be determined in like manner as gains) if, apart from this sub-paragraph, the effect of any computation under the preceding provisions of this Part of this Schedule would be to produce a loss, the unindexed gain on the material disposal shall be treated as nil; and, accordingly, for the purposes of this Part of this Schedule no loss shall be treated as accruing on a material disposal.

(6) Section 323 of the Taxes Act (interpretation of Chapter II of Part XII of that Act) has effect in relation to sub-paragraph (4) above as if it were included in that Chapter.

Gains since 1st January 1984

4 (1) This paragraph applies where—

(a) the interest in the offshore fund which is disposed of by the person making a material disposal was acquired by him before 1st January 1984 ; or

(b) he is treated by virtue of any provisions of sub-paragraphs (3) and (4) below as having acquired the interest before that date.

(2) Where this paragraph applies, there shall be determined for the purposes of this Part of this Schedule the amount which would have been the gain on the material disposals—

(a) on the assumption that, on 1st January 1984, the interest was disposed of and immediately reacquired for a consideration equal to its market value at that time ; and

(b) subject to that, on the basis that the gain is computed In like manner as, under paragraphs 2 and 3 above, the unindexed gain on the material disposal is determined ;

and that amount is in paragraph 5 below referred to as the " post'. 1983 gain " on the material disposal.

(3) Where the person making the material disposal acquired the interest disposed of on or after 1st January 1984 and in such circumstances that, by virtue of any enactment other than section 86(5) of or Schedule 13 to the [1982 c. 39.] Finance Act 1982 (indexation provisions), he and the person from whom he acquired it (in this sub-paragraph and sub-paragraph (4) below referred to as " the previous owner ") fell to be treated for the purposes of the principal Act as if his acquisition were for a consideration of such an amount as would secure that, on the disposal under which he acquired it, neither a gain nor a loss accrued to the previous owner, the previous owner's acquisition of the interest shall be treated as his acquisition of it.

(4) If the previous owner acquired the interest disposed of on or after 1st January 1984 and in circumstances similar to those referred to in sub-paragraph (3) above, his predecessor's acquisition of the interest shall be treated for the purposes of this paragraph as the previous owner's acquisition, and so on back through previous acquisitions in similar circumstances until the first such acquisition before 1st January 1984 or, as the case may be, until an acquisition on a material disposal on or after that date.

The offshore income gain

5 (1) Subject to sub-paragraph (2) below, a material disposal gives rise to an offshore income gain of an amount equal to the unindexed gain on that disposal.

(2) In any case where—

(a) paragraph 4 above applies, and

(b) the post-1983 gain on the material disposal is less than the unindexed gain on the disposal,

the offshore income gain to which the disposal gives rise is an amount equal to the post-1983 gain.

PART II Disposals Involving an Equalisation Element

6 (1) Subject to paragraph 7 below, a disposal to which Chapter VII of Part II of this Act applies by virtue of section 93(3) of this Act gives rise to an offshore income gain of an amount equal to the equalisation element relevant to the asset disposed of.

(2) Subject to sub-paragraphs (4) to (6) below, the equalisation element relevant to the asset disposed of by a disposal falling within sub-paragraph (1) above is the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if, on the date of the disposal, the asset which is disposed of were acquired by another person by way of initial purchase.

(3) In the following provisions of this Part of this Schedule, a disposal falling within sub-paragraph (1) above is referred to as a " disposal involving an equalisation element".

(4) Where the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal after the beginning of the period by reference to which the accrued income referred to in sub-paragraph (2) above is calculated, the amount which, apart from this sub-paragraph, would be the equalisation element relevant to that asset shall be reduced by the following amount, that is to say,—

(a) if that acquisition took place on or after 1st January 1984, the amount which, on that acquisition, was credited to the equalisation account of the offshore fund concerned in respect of accrued income or, as the case may be, would have been so credited if that acquisition had been by way of initial purchase ; and

(b) in any other case, the amount which would have been credited to that account in respect of accrued income if that acquisition had been an acquisition by way of initial purchase taking place on 1st January 1984.

(5) In any case where—

(a) the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal at or before the beginning of the period by reference to which the accrued income referred to in sub-paragraph (2) above is calculated, and

(b) that period began before 1st January 1984 and ends after that date,

the amount which, apart from this sub-paragraph, would be the equalisation element relevant to that asset shall be reduced by the amount which would have been credited to the equalisation account of the offshore fund concerned in respect of accrued income if the acquisition referred to in paragraph (a) above had been an acquisition by way of inital purchase taking place on 1st January 1984.

(6) Where there is a disposal involving an equalisation element, then, to the extent that any amount which was or would be credited to the equalisation account of the offshore fund in respect of accrued income, as mentioned in any of sub-paragraphs (2) to (5) above, represents profits from dealing in commodities, within the meaning of paragraph 4 of Schedule 19 to this Act, one half of that accrued income shall be left out of account in determining under those sub-paragraphs the equalisation element relevant to the asset disposed of by that disposal.

7 (1) For the purposes of this Part of this Schedule, there shall be determined, in accordance with paragraph 8 below, the Part I gain (if any) on any disposal involving an equalisation element.

(2) Notwithstanding anything in paragraph 6 above,—

(a) if there is no Part I gain on a disposal involving an equalisation element, that disposal shall not give rise to an offshore income gain ; and

(b) if, apart from this paragraph, the offshore income gain on a disposal involving an equalisation element would exceed the Part I gain on that disposal, the offshore income gain to which that disposal gives rise shall be reduced to an amount equal to that Part I gain.

8 (1) On a disposal involving an equalisation element, the Part I gain is the amount (if any) which, by virtue of Part I of this Schedule (as modified by the following provisions of this paragraph), would be the offshore income gain on that disposal if it were a material disposal within the meaning of that Part.

(2) For the purposes only of the application of Part I of this Schedule to determine the Part I gain (if any) on a disposal involving an equalisation element, subsections (5) and (6) of section 93 of this Act shall have effect as if, in subsection (5), the words " by virtue of subsection (3) above " were omitted,

(3) If a disposal involving an equalisation element is one which, by virtue of any enactment other than section 86(5)(b) of or Schedule 13 to the [1982 c. 39.] Finance Act 1982 (indexation), is treated tor the purposes of the [1979 c. 14.] Capital Gains Tax Act 1979 as one on which neither a gain nor a loss accrues to the person making the disposal, then, for the purpose only of determining the Part I gain (if any) on the disposal, that enactment shall be deemed not to apply to it (but without prejudice to the application of that enactment to any earlier disposal).

(4) In any case where a disposal involving an equalisation element is made by a company which has made an election under Schedule 6 to the [1983 c. 28.] Finance Act 1983 (indexation: election for pooling) and the asset disposed of consists of or includes securities which, by virtue of paragraph 3(3) of that Schedule, are to be regarded for the purposes of the principal Act as a single asset or part of a single asset, then, for the purpose only of determining the Part I gain (if any) on the disposal,—

(a) the reference in paragraph 2(2)(b) above to an indexation allowance under Chapter III of Part III of the Finance Act 1982 shall be construed as including a reference to an indexation allowance under Schedule 6 to the Finance Act 1983; and

(b) if some of the securities comprised in the asset disposed of were acquired by the company making the disposal before 1st January 1984 and some were not, paragraph 4(2) above shall not apply and paragraph 5 above shall have effect with the omission of sub-paragraph (2) (and the reference to that sub-paragraph in sub-paragraph (1)).

(5) The reference in sub-paragraph (4)(b) above to securities acquired before 1st January 1984 includes a reference to securities which, by virtue of any provisions of paragraph 4 above, are treated as so acquired.

Section 108.

SCHEDULE 21 CAPITAL TRANSFER TA)(: PRE-CONSOLIDATION AMENDMENTS

The Finance Act 1975

1 In section 22(4) of the [1975 c. 7.] Finance Act 1975 (in this Schedule referred to as " the 1975 Act ")—

(a) for the words from the beginning to " his death " there shall be substituted the words " In determining for the purposes of this Part of this Act the value of the estate, immediately before his death, of a person whose spouse (or former spouse) died before 13th November 1974 "; and

(b) for the words "that death" there shall be substituted the words " the later death ".

2 In section 25(10) of the 1975 Act, after the word " section" there shall be inserted the words " (except subsection (8)) ".

3 In section 26(2) of the 1975 Act—

(a) the words from the beginning to " respectively, and " shall cease to have effect; and

(b) at the end, there shall be added the words " or by virtue of paragraph 24(2) of Schedule 5 to this Act ".

4 In section 45(1) of the 1975 Act, after the words " as domiciled in the United Kingdom " there shall be inserted the words " (and not elsewhere) " ; and section 51(3) of that Act shall cease to have effect.

5 In section 51(1) of the 1975 Act—

(a) the definition of " enactment" shall cease to have effect; and

(b) after the definition of " Inland Revenue charge " there shall be inserted—

• “' land ' includes buildings and Other structures, land covered with water, and any estate, interest, easement, servitude or right in or over land; but does not include any estate, interest or right by way of mortgage or other security ;”.

6 In paragraph 6(6) of Schedule 4 to the 1975 Act, for the words following " including references " there shall be substituted the words "to—

(a) disposals on which tax is chargeable under paragraph 2 of Schedule 9 to this Act,

(b) chargeable events by reference to which tax is chargeable under section 78 of the [1976 c. 40.] Finance Act 1976,

(c) Occasions on which tax is chargeable under section 82 of the Finance Act 1976 or under Chapter II of Part IV of the [1982 c. 39.] Finance Act 1982,

or to the amounts on which tax is then chargeable."

7 In paragraph 14(2) of Schedule 4 to the 1975 Act, for the words "value Of an interest" there shall be substituted the words " net value of an interest ".

8 In paragraph 19(4) of Schedule 4 to the 1975 Act, the words " to any person " and the words " Of that person " shall cease to have effect.

9 Paragraph 44 of Schedule 4 to the 1975 Act shall cease to have effect.

10 In paragraph 1(8) of Schedule 5 to the 1975 Act, for the words "and section 25(3)(d) of this Act" there shall be substituted the words " , sections 22(2) and (3), 24(3) and 25(3)(d) of this Act and sections 93 and 94 ".

11 In paragraph 4(7) of Schedule 5 to the 1975 Act, after the words " surviving spouse " there shall be inserted the words " (or surviving former spouse) ".

12 In paragraph 17(3)(b) of Schedule 5 to the 1975 Act, for the words " this Schedule and of Chapter II of Part IV of the [1982 c. 39.] Finance Act 1982" there shall be substituted the words " this Part of this Act (except subsection (3) of section 23 and section 20(4) so far as relating to that subsection) ".

13 In paragraph 22(1) of Schedule 5 to the 1975 Act, for the words " this Schedule " there shall be substituted the words " this Part of this Act ".

14 (1) Paragraph 24 of Schedule 5 to the 1975 Act shall be amended as follows.

(2) In sub-paragraph (1), for paragraph (a) there shall be substituted the following paragraphs—

“(a) the reference in subsection (2) of that section to subsection (1) shall have effect as including a reference to sub-paragraph (2) below;

(aa) subsection (3) of that section shall apply in relation to tax chargeable by virtue of sub-paragraph (2) below as it applies in relation to tax chargeable under subsection (1) of that section ;”.

(3) In sub-paragraph (5), for the words "this Schedule and of Chapter II of Part IV of the Finance Act 1982" there shall be substituted the words " this Part of this Act (except subsection (3) of section 23 and section 20(4) so far as relating to that subsection) ".

15 In paragraph 4(2)(b) of Schedule 7 to the 1975 Act, for the words " which is, or forms part of, a colony, protectorate, protected state or United Kingdom trust territory " there shall be substituted the words " which, at the time when the fund was established, was, or formed part of, a colony (within the meaning of Schedule 1 to the [1978 c. 30.] Interpretation Act 1978), protectorate, protected state or United Kingdom trust territory ".

16 In paragraph 1(1) of Schedule 10 to the 1975 Act, for the words "a transferor's estate" there shall be substituted the words " a person's estate ".

17 In paragraph 5(1)(b) of Schedule 10 to the 1975 Act, for the word " by " there shall be substituted the word " for ".

The Development Land Tax Act 1976

18 (1) Section 34 of the [1976 c. 24.] Development Land Tax Act 1976 shall be amended as follows.

(2) In subsection (3), for paragraph (d) there shall be substituted the following paragraph—

“(d) ' a CTT transfer' means an event which is—

(i) a transfer of value, for the purposes of capital transfer tax, giving rise to liability for that tax,

(ii) an occasion on which capital transfer tax is chargeable under Chapter II of Part IV of the [1982 c. 39.] Finance Act 1982, or

(iii) a capital distribution (within the meaning of section 51(1) of the [1975 c. 7.] Finance Act 1975 as it has effect in relation to events before 9th March 1982),

and on the occurrence of which an interest in land is acquired by any person.”

(3) For subsection (5) there shall be substituted the following subsection—

“(5) In any case where the whole or any part of the land in which the interest referred to in paragraph (d) of subsection (3) above subsists—

(a) is designated under section 77 of the [1976 c. 40.] Finance Act 1976 (conditional exemption) in relation to a conditionally exempt transfer (as defined in section 76 of that Act) made on a death, or

(b) is designated as property to which section 34 of the Finance Act 1975 applies (conditional exemption on death before 7th April 1976),

it shall be assumed for the purpose only of determining whether the transfer of value in question falls within sub-paragraph (i) of subsection (3)(d) above that the transfer of value was not a conditionally exempt transfer or, as the case may be, that section 34 of the Finance Act 1975 never applied to the property.”

19 In paragraph 18(2) of Schedule 6 to the [1976 c. 24.] Development Land Tax Act 1976—

(a) for the words from " as property " to " death) " there shall be substituted the words " under section 34 of that Act or under section 77 of the Finance Act 1976 (conditional exemption) "; and

(b) in paragraph (a) after the words " Act 1975 " there shall be inserted the words " or under section 78 of the Finance Act 1976 ".

The Finance Act 1976

20 In section 76(3)(b) of the Finance Act 1976, the words from " or the value " to the end shall cease to have effect.

21 In section 105 of the Finance Act 1976, subsections (3) and (4) shall cease to have effect.

22 In section 123(2) of the Finance Act 1976, after the words " shall carry interest" there shall be inserted the words " (which shall not constitute income for any tax purposes) ".

The Finance Act 1980

23 In Schedule 15 to the [1980 c. 48.] Finance Act 1980—

(a) in paragraphs 2A, 5 and 6, for the word " previous " there shall be substituted the word " other "; and

(b) in paragraphs 5 and 6, after the words " by that reduction " there shall be inserted the words " (or by the most recent of those reductions) ".

The Finance Act 1982

24 In section 94(6) of the [1982 c. 39.] Finance Act 1982, the Words from " and, in " to the end shall cease to have effect.

25 In sections 120(1), 121(1) and (2) and 123 of the Finance Act 1982, after the words " for the purposes of this Chapter " there shall be inserted the words " , of sections 93 and 94 above and of sections 81, 82 and 82A of the [1976 c. 40.] Finance Act 1976 ".

26 In sections 122(1) and 124 of the Finance Act 1982, after the Words " for the purposes of this Chapter " there shall be inserted the words " and of sections 93 and 94 above ".

Section 127.

SCHEDULE 22 SPECIAL AND GENERAL COMMISSIONERS

Appointment of Special Commissioners

1 For section 4 of the [1970 c. 9.] Taxes Management Act 1970 (appointment of Special Commissioners) there shall be substituted—

“4 Special Commissioners.

(1) The Lord Chancellor shall, after consultation with the Lord Advocate, appoint such persons as he thinks fit as " Commissioners for the special purposes of the Income Tax Acts" (in the Taxes Acts referred to as " Special Commissioners ") and shall designate one of the Special Commissioners as the Presiding Special Commissioner.

(2) No person shall be appointed under subsection (1) above unless he is a barrister, advocate or solicitor of not less than ten years' standing.

(3) If the Presiding Special Commissioner is temporarily absent or unable to act or there is a vacancy in his office, the Lord Chancellor may designate another Special Commissioner to act as deputy Presiding Special Commissioner and the Commissioner so designated shall, when so acting, have all the functions of the Presiding Special Commissioner.

(4) The Lord Chancellor may, if he thinks fit, and after consultation with the Lord Advocate, remove a Special Commissioner from office on the grounds of incapacity or misbehaviour.

(5) By virtue of their appointment the Special Commissioners shall have authority to execute such powers, and to perform such duties, as are assigned to them by any enactment

(6) Such sums shall be allowed to Special Commissioners in respect of salary and incidental expenses and such pensions (including allowances and gratuities) shall be paid to, or in respect of, them as the Lord Chancellor may, with the approval of the Treasury, determine.

(7) Officers and staff may be appointed under section 27 of the [1971 c. 23.] Courts Act 1971 (court staff) for carrying out the administrative work of the Special Commissioners.

4A Deputy Special Commissioners.

(1) If it appears to the Lord Chancellor expedient to do so in order to facilitate the performance of any functions of the Special Commissioners, he may, after consultation with the Lord Advocate, appoint a person to be a deputy Special Commissioner during such period or on such occasions as the Lord Chancellor thinks fit.

(2) A person shall not be qualified for appointment as a deputy Special Commissioner unless he is qualified for appointment as a Special Commissioner.

(3) A deputy Special Commissioner while acting under this section shall have all the jurisdiction and functions of a Special Commissioner and any reference to a Special Commissioner in the following provisions of this Act or in any other enactment or any instrument made under any enactment (whenever passed or made) shall include a reference to a deputy Special Commissioner.

(4) The duty under section 6(1) below shall only apply to a deputy Special Commissioner on his first appointment to that office.

(5) Notwithstanding the expiry of any period for which a person is appointed under this section, he may continue to act under the appointment for the purpose of continuing to deal with any matter with winch he was concerned during that period.

(6) The Lord Chancellor may pay to any person appointed under this section such remuneration and allowances as he may, with the approval of the Treasury, determine.”

Special Commissioners: quorum

2 (1) Section 45 of the Act of 1970 (quorum of Special Commissioners) shall be amended as follows.

(2) In subsection (1), for the word " may " there shall be substituted the words " shall, except in any case where the Presiding Special Commissioner directs otherwise, " and the words "or any two or more Special Commissioners " shall be omitted.

(3) In subsection (3), after the word "brought" there shall be inserted the words " , in accordance with a direction of the Presiding Special Commissioner ".

(4) Subsections (2) and (4) to (6) shall be omitted.

Elections to bring appeals before Special Commissioners

3 (1) In section 31 of the Act of 1970 (appeals against assessments) the following subsections shall be inserted after subsection (5)—

“(5A) An election under subsection (4) above shall be disregarded if—

(a) the appellant and the inspector or other officer of the Board agree in writing, at any time before the determination of the appeal, that it is to be disregarded ; or

(b) the General Commissioners have given a direction under subsection (5C) below and have not revoked it.

(5B) At any time before the determination of an appeal in respect of which an election has been made under subsection (4) above, the inspector or other officer of the Board after giving notice to the appellant may refer the election to the General Commissioners.

(5C) On any such reference the Commissioners shall, unless they are satisfied that the appellant has arguments to present or evidence to adduce on the merits of the appeal, direct that the election be disregarded.

(5D) If, at any time after the giving of a direction under subsection (5C) above (but before the determination of the appeal) the General Commissioners are satisfied that the appellant has arguments to present or evidence to adduce on the merits of the appeal, they shall revoke the direction.

(5E) Any decision to give a direction under subsection (5C) above or revoke such a direction under subsection (5D) above shall be final.”.

(2) In Schedule 2 to the Act of 1970 (appeals against decisions on claims), in paragraph 1, the following sub-paragraphs shall be inserted after sub-paragraph (1)—

“(1A) An election under sub-paragraph (1) above shall be disregarded if—

(a) the appellant and the inspector or other officer of the Board agree in writing, at any time before the determination of the appeal, that it is to be disregarded ; or

(b) the General Commissioners have given a direction under sub-paragraph (1C) below and have not revoked it.

(1B) At any time before the determination of an appeal in respect of which an election has been made under sub-paragraph (1) above, the inspector or other officer of the Board after giving notice to the appellant may refer the election to the General Commissioners.

(1C) On any such reference the Commissioners shall, unless they are satisfied that the appellant has arguments to present or evidence to adduce on the merits of the appeal, direct that the election be disregarded.

(1D) If, at any time after the giving of a direction under sub-paragraph (1C) above (but before the determination of the appeal) the General Commissioners are satisfied that the appellant has arguments to present or evidence to adduce on the merits of the appeal, they shall revoke the direction.

(1E) Any decision to give a direction under sub-paragraph (1C) or revoke such a direction under sub-paragraph (1D) above shall be final.”.

Procedural rules

4 After section 57A of the Act of 1970 there shall be inserted the following section—

“57B Commissioners: procedural rules.

(1) The Lord Chancellor may, with the consent of the Lord Advocate, make rules—

(a) as to the procedure of the Special Commissioners and the procedure in connection with the bringing of matters before them ;

(b) as to the time within which matters may be brought before the Special Commissioners ; and

(c) providing for appeals which have been heard by the Special Commissioners in the absence of the appellant to be reheard,

in such circumstances and subject to such conditions, as the rules may prescribe.

(2) Rules under this section may make such consequential provision (including the amendment of any enactment or instrument made under any enactment) as the Lord Chancellor considers necessary.

(3) Rules under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.”

Transfer of appeals from General to Special Commissioners

5 In section 44 of the Act of 1970 (jurisdiction of General Commissioners) the following subsection shall be inserted after subsection (3)—

“(3A) Where in any case (including one in which proceedings may be brought as mentioned in subsection (3) above)—

(a) an appeal has been brought before the General Commissioners ; and

(b) those Commissioners consider that, because of the complexity of the appeal or the length of time likely to be required for hearing it, the appeal should be brought before the Special Commissioners ;

the General Commissioners may, with the agreement of the Special Commissioners, and having considered any representations made to them by the parties, arrange for the transfer of the proceedings to the Special Commissioners.”.

Fee for statement of case

6 In section 56(3) of the Act of 1970 and paragraph 10(2) of Schedule 4 to the [1975 c. 7.] Finance Act 1975 (fee for statement of case for opinion of High Court) for " £1 " there shall be substituted " £25 ".

Statement of case from Special Commissioners to Court of Appeal

7 In the Act of 1970, the following section shall be inserted after section 56 (statement of case for opinion of High Court)—

“56A Statement of case: Special Commissioners to Court of Appeal.

(1) The Lord Chancellor may by order provide that—

(a) in such classes of appeal in England and Wales as may be prescribed by the order; and

(b) subject to the consent of the parties and to such other conditions as may be so prescribed ;

a case stated by the Special Commissioners under section 56 above, for the opinion of the High Court, shall be referred to the Court of Appeal.

(2) An order under this section—

(a) may provide that section 56 above shall have effect, in relation to any appeal to which the order applies, with such modifications as may be specified in the order'; and

(b) shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.”.

Saving

8 Nothing in this Schedule shall affect the appointment of any person who, immediately before the passing of this Act, held office as a Special Commissioner.

Section 128(6).

SCHEDULE 23 REPEALS

PART I Made-Wine

Chapter	Short Title	Extent of Repeal
1979 c. 4.	The Alcoholic Liquor Duties Act 1979.	Schedule 2.
1982 c. 39.	The Finance Act 1982.	Section 1(4).
		Schedule 2.
1983 c. 28.	The Finance Act 1983.	Section 1(4).
		Schedule 2.

PART II Gaming Machine Licence Duty

Chapter	Short Title	Extent of Repeal
These repeals do not affect licences granted for periods beginning before 1st October 1984.
1981 c. 63.	The Betting and Gaming Duties Act 1981.	Section 24(1).
		In Schedule 4, in paragraphs 6 and 8(2), the words "in respect of any premises " and in paragraph 10(3) the words from " except" to the end-
1982 c. 39.	The Finance Act 1982.	In Schedule 6, paragraphs 6 to 8 and 16.

PART III Value Added Tax

Chapter	Short Title	Extent of Repeal
1983 c. 55.	The Value Added Tax Act 1983.	In section 16(5) the words " of a supply of goods or services outside the United Kingdom or " and " supply or ".
		In Schedule 5, in Group 8, in Note (2), in paragraph (b), the words "or alteration" and paragraph (c).

PART IV Customs and Excise: Miscellaneous

Chapter	Short Title	Extent of Repeal
1979 c. 58.	The Isle of Man Act 1979.	In Schedule 1, paragraph 25.
1982 c. 39.	The Finance Act 1982.	Section 2.
1983 c. 28.	The Finance Act 1983.	Section 2.
1983 c. 55.	The Value Added Tax Act 1983.	In section 24(3)(b) the figure " 7 ".

PART V Income Tax and Corporation Tax: General

Chapter	Short Title	Extent of Repeal
1. The repeals in section 310 of the Income and Corporation Taxes Act 1970 and in Schedule 18 to the Finance Act 1972 do not have effect with respect to any financial year ending before 1st April 1986. 2. The repeals in section 343 of the Income and Corporation Taxes Act 1970 and section 58 of the Finance Act 1980 have effect from 6th April 1985. 3. The repeals in section 96 of the Finance Act 1972 and section 10(3) of the Finance Act 1974 do not have effect with respect to any financial year ending before 1st April 1985. 4. The repeals in Schedule 1 to the Finance Act 1974 have effect in relation to payments of interest made after the passing of this Act. 5. The repeal of section 17(3) of the Oil Taxation Act 1975 has effect with respect to any advance corporation tax which is, within the meaning of section 77 of this Act, advance corporation tax paid by a company in respect of distributions made in an accounting period of the company ending on or after 1st April 1984. 6. The repeal in paragraph 13 of Schedule 10 to the Finance Act 1980 has effect from the day appointed under section 39(9) of this Act. 7. The repeal in section 40 of the Finance Act 1982 has effect in relation to any right to acquire shares which is obtained after 5th April 1984. 8. The repeal in section 20(4) of the Finance Act 1983 has effect in relation to payments made on or after 6th April 1984.
1970 c. 10.	The Income and Corporation Taxes Act 1970.	Section 310(1), (2) and (4).
		In section 343(1), in paragraph (a), the words from " which takes " to " this section " and the proviso.
1972 c. 41.	The Finance Act 1972.	Section 96.
		In Schedule 18, paragraph 2(1).
1974 c. 30.	The Finance Act 1974.	Section 10(3).
		In paragraph 14(1)(a) of Schedule 1, the words " employee-controlled company ", in both places.
1975 c. 22.	The Oil Taxation Act 1975.	Section 17(3).
1980 c. 48.	The Finance Act 1980.	Section 58.
		In Schedule 10, in paragraph 13, the words " (not exceeding £50 monthly) ".
1982 c. 39.	The Finance Act 1982.	Section 35(3).
		Section 40(4) and (5).
		In section 72(7), the words " on or before 31st March 1987 ".
1982 c. 50.	The Insurance Companies Act 1982.	In Schedule 5, paragraph 24.
1983 c. 28.	The Finance Act 1983.	Section 20(4).

PART VI Income Tax: The Additional Rate

Chapter	Short Title	Extent of Repeal
The repeal in subsection (6) of section 87 of the Finance Act 1972 does not have effect for the purpose of determining whether a person has paid tax in respect of excess liability, within the meaning of that subsection, for the year 1983-84 or any earlier year of assessment or the amount so paid.
1970 c. 10.	The Income and Corporation Taxes Act 1970.	In section 30(3), the words " or additional".
		In section 36(1), the words " or additional".
		In section 38(2) the words from " and in determining" to " investment income ".
		In sections 403(1), 424(c), 430(1), 457(1) and 458(1) the words " or additional".
1971 c. 68.	The Finance Act 1971.	Section 32(3) and (4).
		Section 34(4).
		In Schedule 7, in paragraph 2(2), the words " or additional ".
1972 c. 41.	The Finance Act 1972.	In section 87(6), the words " or additional".
		In Schedule 16, in paragraph 5(6A), the words " or additional".
1973 c. 51.	The Finance Act 1973.	In section 44, the words " or additional".
		In section 59(2), the words from "the additional rate" to " them and ".
1974 c. 30.	The Finance Act 1974.	Section 15.
		In section 16(1), the words following " subsection (2) below ".
		In section 43(1), the words from " In this subsection " onwards.
		In Schedule 7, paragraph 1 and, in paragraph 9(5), the words from " and " onwards.
1975 c. 7.	The Finance Act 1975.	In Schedule 2, in paragraph 19(1A) the words "or additional".
1980 c. 48.	The Finance Act 1980.	In section 24(3), the words from "or over which" to " additional rate ", the word " respectively ", where it first occurs, and the words " and the investment income threshold ".

PART VII Foreign Earnings and Emoluments

Chapter	Short Title	Extent of Repeal
1. The repeals in subsection (2) of section 188 of, and in Schedule 8 to, the Taxes Act have effect where the relevant date (within the meaning of that section) falls after 13th March 1984 but subject to subsection (8) of section 30 of this Act. 2. The repeal of section 23(3) of the Finance Act 1974 and the repeal in Schedule 12 of the Taxes Act have effect in relation to the year 1985-86 and subsequent years of assessment but subject to subsection (4) of section 30 of this Act. 3. The repeal in Schedule 2 of the Finance Act 1974 has effect in relation to the year 1989-90 and subsequent years of assessment. 4. The repeals in the Acts of 1975, section 31(2) of, and Schedule 7 to, the Finance Act 1977 and the Finance Act 1978 have effect for the year 1985-86 and subsequent years of assessment.
1970 c. 10.	The Income and Corporation Taxes Act 1970.	In section 188(2), the words from " in respect of one-half " to " charged " and paragraph (a).
		In Schedule 8, in paragraph 12, the words " (2) or ".
		In Part III of Schedule 12, in paragraph 2(3) the words " (3) and ".
1974 c. 30.	The Finance Act 1974.	Section 23(3).
		In Schedule 2, paragraph 3.
1975 c. 14.	The Social Security Act 1975.	In Schedule 2, in paragraph 3(2), paragraph (cc).
1975 c 15.	The Social Security (Northern Ireland) Act 1975.	In Schedule 2, in paragraph 3(2), paragraph (cc).
1977 c. 36.	The Finance Act 1977.	In section 31(2), the words from the beginning to " emoluments); and ".
		In Schedule 7, paragraphs 2, 3,4(3), (4) and 5, in paragraph 9 the words "or 2", and paragraph 10.
1978 c. 42.	The Finance Act 1978.	Section 27.
		Schedule 4.

PART VIII Capital Gains

Chapter	Short Title	Extent of Repeal
1. The repeal of sections 6, 8, 9 and 148 of the Capital Gains Tax Act 1979 and of section 82 of the Finance Act 1980 and section 85 of the Finance Act 1982 has effect with respect to disposals on or after 6th April 1984. 2. The repeals in section 29 A of the Capital Gains Tax Act 1979 have effect in relation to disposals and acquisitions on or after 6th April 1983. 3. The repeals in section 32 of that Act have effect where the disposal by the person who is neither resident nor ordinarily resident in the United Kingdom is made on or after 6th April 1985. 4. The repeals in sections 137(4)(aa) and 138(1)(aa) of that Act have effect in relation to any abandonment or other disposal on or after 6th April 1984.
1979 c. 14.	The Capital Gains Tax Act 1979.	Section 6.
		Sections 8 and 9.
		In section 29A, in subsection (2), the words "Except in the case specified in subsection (4) below" and, in paragraph (a), the words " or the corresponding disposal is made by an excluded person ".
		Section 32(5) and (6).
		In sections 137(4)(aa) and 138(1)(aa), the words "to buy or sell shares in a company ".
		Section 148.
1980 c. 48.	The Finance Act 1980.	Section 82.
1982 c. 39.	The Finance Act 1982.	Section 85.

PART IX Capital Transfer Tax

Chapter	Short Title	Extent of Repeal
The repeal of section 114(8) of the Finance Act 1976 has effect as from 1st April 1983.
1975 c. 7.	The Finance Act 1975.	In section 26(2), the words from the beginning to "respectively, and ".
		In section 51(1), the definition of " enactment".
		Section 51(3).
		In Schedule 4, in paragraph 19(4), the words " to any person " and the words " of that person ".
		In Schedule 4, paragraph 44.
1976 c. 40.	The Finance Act 1976.	In section 76(3)(b), the words from " or the value" onwards.
		Section 105(3) and (4).
		Section 114(8).
		In Schedule 11, paragraph 2.
1982 c. 39.	The Finance Act 1982.	In section 94(6), the words from " and, in " onwards.
		In Schedule 17, paragraphs 9, 18 and 28.

PART X Stamp Duty

Chapter	Short Title	Extent of Repeal
1891 c. 39.	The Stamp Act 1891.	In section 75(1), the words " not exceeding thirty-five years ".
1963 c. 25.	The Finance Act 1963.	In Schedule 11, Part I.
1974 c. 30.	The Finance Act 1974.	In Schedule 11, in Part I, paragraphs 3 and 4, in Part II, paragraphs 13 and 14 and Part III.
1980 c. 48.	The Finance Act 1980.	Section 95(1).
1982 c. 39.	The Finance Act 1982.	Section 128(1).

PART XI National Insurance Surcharge

Chapter	Short Title	Extent of Repeal
These repeals have effect with respect to earnings paid on or after 6th April 1985.
1976 c. 85.	The National Insurance Surcharge Act 1976.	The whole Act.
1977 c. 36.	The Finance Act 1977.	Section 57.
1978 c. 42.	The Finance Act 1978.	Section 75.
1980 c. 48.	The Finance Act 1980.	In section 118(4), the words from " and section 57" to " surcharge)".
1982 c. 39.	The Finance Act 1982.	Section 143.
1982 c. 55.	The National Insurance Surcharge Act 1982.	The whole Act.
1983 c. 28.	The Finance Act 1983.	Section 42.
		In section 46(4), the words from " and section 57" to " surcharge) ".

PART XII Development Land Tax

Chapter	Short Title	Extent of Repeal
1976 c. 24.	The Development Land Tax Act 1976.	In section 19A(1), the words " and before 1st April 1984 ".
		In section 26, subsection (2) and, in subsection (3), the words " or subsection (2) ".
		In section 40, in subsection (1), the words "which, at that time, is development land" and subsection (8).
		In section 47(1 A), the words " are begun on or before 31st December 1984 and ".
		In Schedule 8, in paragraph 45(1), (3), (4), (5) and (7)(b), the words " or half-yearly ".

PART XIII Special and General Commissioners

Chapter	Short Title	Extent of Repeal
1970 c. 9.	The Taxes Management Act 1970.	In section 45, in subsection (1) the words " or any two or more Special Commissioners ", and subsections (2), (4), (5) and (6).
		In section 55(11) the words from the beginning to " and ".

PART XIV Miscellaneous

Chapter	Short Title	Extent of Repeal
1968 c. 13.	The National Loans Act 1968.	In section 3(5), the words from " and " to " future Act".
1972 c. 41.	The Finance Act 1972.	Section 132.
1975 c. 7.	The Finance Act 1975.	Section 55.
1975 c. 22.	The Oil Taxation Act 1975.	In section 3(4), the word " or " at the end of paragraph (d).
1978 c. 42.	The Finance Act 1978.	Section 78.
1982 c. 39.	The Finance Act 1982.	Section 154.