After section 59DA of the M24Taxes Management Act 1970 there shall be inserted—

“59E Further provision as to when corporation tax is due and payable.

(1)

The Treasury may by regulations make provision, in relation to companies of such descriptions as may be prescribed, for or in connection with treating amounts of corporation tax for an accounting period as becoming due and payable on dates which fall on or before the date on which corporation tax for that period would become due and payable apart from this section.

(2)

Without prejudice to the generality of subsection (1) above, regulations under this section may make provision—

(a)

for or in connection with the determination of amounts of corporation tax which are treated as becoming due and payable under the regulations;

(b)

for or in connection with the determination of the dates on which amounts of corporation tax are treated as becoming due and payable under the regulations;

(c)

for or in connection with the making of payments to the Board in respect of amounts of corporation tax which are treated as becoming due and payable under the regulations;

(d)

for or in connection with the determination of the amount of any such payments as are mentioned in paragraph (c) above;

(e)

for or in connection with the determination of the dates on which any such payments as are mentioned in paragraph (c) above become due and payable;

(f)

for or in connection with any assumptions which are to be made for any purposes of the regulations;

(g)

for or in connection with the payment to the Board of interest on amounts of corporation tax which are treated as becoming due and payable under the regulations;

(h)

for or in connection with the repayment of amounts paid under the regulations;

(i)

for or in connection with the payment of interest by the Board on amounts paid or repaid under the regulations;

(j)

with respect to the furnishing of information to the Board;

(k)

with respect to the keeping, production or inspection of any books, documents or other records;

(l)

for or in connection with the imposition of such requirements as the Treasury think necessary or expedient for any purposes of the regulations;

(m)

for or in connection with appeals in relation to questions arising under the regulations.

(3)

Regulations under this section may make provision—

(a)

for amounts of corporation tax for an accounting period to be treated as becoming due and payable on dates which fall within the accounting period;

(b)

for payments in respect of any such amounts of corporation tax for an accounting period as are mentioned in paragraph (a) above to become due and payable on dates which fall within the accounting period.

(4)

Where interest is charged by virtue of regulations under this section on any amounts of corporation tax for an accounting period which are treated as becoming due and payable under the regulations, the company shall, in such circumstances as may be prescribed, be liable to a penalty not exceeding twice the amount of that interest.

(5)

Regulations under this section—

(a)

may make such modifications of any provisions of the Taxes Acts, or

(b)

may apply such provisions of the Taxes Acts,

as the Treasury think necessary or expedient for or in connection with giving effect to the provisions of this section.

(6)

Regulations under this section which apply any provisions of the Taxes Acts may apply those provisions either without modifications or with such modifications as the Treasury think necessary or expedient for or in connection with giving effect to the provisions of this section.

(7)

Regulations under this section—

(a)

may make different provision for different purposes, cases or circumstances;

(b)

may make different provision in relation to companies or accounting periods of different descriptions;

(c)

may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient.

(8)

Subject to subsection (9) below, regulations under this section may make provision in relation to accounting periods beginning before (as well as accounting periods beginning on or after) the date on which the regulations are made.

(9)

Regulations under this section may not make provision in relation to accounting periods ending before the day appointed under section 199 of the M25Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment).

(10)

In this section—

“modifications” includes amendments, additions and omissions;

“prescribed” means prescribed by regulations made under this section.

(11)

Any reference in this section to corporation tax includes a reference—

(a)

to any amount due from a company under section 419 of the principal Act (loans to participators etc) as if it were an amount of corporation tax chargeable on the company;

(b)

to any sum chargeable on a company under section 747(4)(a) of the principal Act (controlled foreign companies) as if it were an amount of corporation tax.”

At the end of the section there shall be added—

“(2)

Paragraph (b) of subsection (1) above does not apply in relation to interest under section 87 or 87A of this Act payable by a company within the charge to corporation tax.”

After subsection (5) there shall be inserted—

“(5A)

Paragraph (b) of subsection (5) above does not apply in relation to interest payable to a company within the charge to corporation tax.”

For section 98 of the Taxes Act 1988 (tied premises) substitute—

“98 Tied premises: receipts and expenses treated as those of trade.

(1)

This section applies where a person (“the trader")—

(a)

carries on a trade,

(b)

in the course of the trade supplies, or is concerned in the supply of, goods sold or used on premises occupied by another person,

(c)

has an estate or interest in those premises, and

(d)

deals with that estate or interest as property employed for the purposes of the trade.

(2)

Where this section applies the receipts and expenses in connection with the premises that would otherwise fall to be brought into account in computing the profits of a Schedule A business carried on by the trader shall instead be brought into account in computing the profits of the trade.

(3)

Any necessary apportionment shall be made on a just and reasonable basis of receipts or expenses—

(a)

which do not relate only to the premises concerned, or

(b)

where the conditions in subsection (1) are met only in relation to part of the premises.

(4)

This section applies to premises outside the United Kingdom as if the premises were in the United Kingdom.”.

In section 156 of the M31Taxation of Chargeable Gains Act 1992 (replacement of business assets: buildings and land), for subsection (4) substitute—

“(4)

Where section 98 of the Taxes Act applies (tied premises: receipts and expenses treated as those of trade), the trader shall be treated, to the extent that the conditions in subsection (1) of that section are met in relation to premises, as occupying as well as using the premises for the purposes of the trade.”.

After section 140 of the Taxes Act 1988 there shall be inserted the following sections—

“140A Conditional acquisition of shares.

(1)

This section applies where—

(a)

a beneficial interest in any shares in a company (“the employee"s interest’) is acquired by any person (“the employee") as a director or employee of that or another company; and

(b)

the employee acquires that interest on terms that make his interest in the shares only conditional.

(2)

If the terms on which the employee acquires the employee’s interest are such that his interest in the shares in question will or might continue to be only conditional until a time more than five years after his acquisition of the interest, tax shall be chargeable under Schedule E in respect of that interest on the basis that it is emoluments of the office or employment concerned.

(3)

In any other case, there shall (subject to the following provisions of this section) be no tax chargeable on the employee under Schedule E in respect of his acquisition of the interest except any tax which is so chargeable by virtue only of section 135 or 162.

(4)

If, in a case falling within subsection (2) or (3) above—

(a)

the shares cease, without the employee ceasing to have a beneficial interest in them, to be shares in which the employee’s interest is only conditional, or

(b)

the employee, not having become chargeable by virtue of this subsection in relation to the shares, sells or otherwise disposes of the employee’s interest or any other beneficial interest in them,

he shall, for the year of assessment in which they so cease, or in which the sale or other disposal takes place, be chargeable to tax under Schedule E on the amount specified in subsection (5) below.

(5)

That amount is the amount (if any) by which the sum of the deductible amounts is exceeded by the market value of the employee’s interest immediately after that interest ceases to be only conditional or, as the case may be, at the time of the sale or other disposal.

(6)

For the purposes of subsection (5) above the market value of the employee’s interest at any time is the amount that might reasonably be expected to be obtained from a sale of that interest in the open market at that time.

(7)

For those purposes the deductible amounts are—

(a)

the amount or value of the consideration given for the employee’s interest;

(b)

any amounts on which the employee has become chargeable to tax under Schedule E in respect of his acquisition of the employee’s interest;

(c)

any amounts on which the employee has, by reference to an event occurring not later than the time of the event by virtue of which a charge arises under this section, become chargeable to tax in respect of the shares under section 78 or 79 of the M38Finance Act 1988 (unapproved employee share schemes).

(8)

Where the employee dies holding the employee’s interest this section shall have effect—

(a)

as if he had disposed of that interest immediately before his death; and

(b)

as if the market value of the interest at the time of that disposal were to be determined for the purposes of subsection (5) above on the basis-

(i)

that it is known that the disposal is being made immediately before the employee’s death; and

(ii)

that any restriction on disposal subject to which the employee holds the shares is to be disregarded in so far as it is a restriction terminating on his death.

(9)

Any reference in this section or section 140B or 140C to shares in a company includes a reference to securities issued by a company; and the references in subsection (7)(c) above to an event include references to the expiry of a period.

140B Consideration for shares conditionally acquired.

(1)

This section applies in relation to any shares for determining the amount or value of the consideration referred to in section 140A(7)(a).

(2)

Subject to the following provisions of this section, that consideration is any given by—

(a)

the employee; or

(b)

in a case where section 140H(1)(b) applies and the shares were acquired by another person, that other person,

in respect of the acquisition of an interest in the shares.

(3)

The amount or value of the consideration given by any person for an interest in the shares shall include—

(a)

the amount or value of any consideration given for a right to acquire those shares; and

(b)

the amount or value of any consideration given for anything by virtue of which the employee’s interest in the shares ceases to be only conditional.

(4)

Where any consideration is given partly in respect of one thing and partly in respect of another, the amount given in respect of the different things shall be determined on a just and reasonable apportionment.

(5)

The consideration which for the purposes of this section is taken to be given wholly or partly for anything shall not include the performance of any duties of or in connection with the office or employment by reference to which the interest in the shares in question has been acquired by a person as a director or employee of a company.

(6)

No amount shall be counted more than once in the computation of the amount or value of any consideration.

(7)

Subsections (1) to (3) of section 136 shall apply for determining for the purposes of subsection (3)(a) above the amount or value of the consideration given for a right to acquire any shares as they apply for determining such an amount for the purposes of section 135.

140C Cases where interest to be treated as only conditional.

(1)

For the purposes of sections 140A and 140B (but subject to the following provisions of this section) a beneficial interest in shares is only conditional for so long as the terms on which the person with that interest is entitled to it—

(a)

provide that, if certain circumstances arise, or do not arise, there will be a transfer, reversion or forfeiture as a result of which that person will cease to be entitled to any beneficial interest in the shares; and

(b)

are not such that, on the transfer, reversion or forfeiture, that person will be entitled in respect of his interest to receive an amount equal to or more than the amount that might reasonably be expected (if there were no provision for transfer, reversion or forfeiture) to be obtained from a sale of that interest in the open market at that time.

(2)

A person shall not for the purposes of sections 140A and 140B be taken, in relation to any shares, to have an interest which is only conditional by reason only that, in a case where there is no restriction on the meeting of calls by that person, the shares—

(a)

are unpaid or partly paid; and

(b)

may be forfeited for non-payment of calls.

(3)

A person shall not for the purposes of sections 140A and 140B be taken, in relation to any shares in a company, to have an interest which is only conditional by reason only that the articles of association of the company require him to offer the shares for sale if he ceases to be an officer or, as the case may be, employee of the company.

(4)

A person shall not for the purposes of sections 140A and 140B be taken, in relation to any security, to have an interest which is only conditional by reason only that the security may be redeemed on payment of any amount.

(5)

In subsection (1) above the references, in relation to the terms of a person’s entitlement, to circumstances arising include references—

(a)

to the expiration of a period specified in or determined under those terms or the death of that person or any other person; and

(b)

to the exercise by any person of any power conferred on him by or under those terms.”

After subsection (6) of section 79 of that Act (charge for shares in dependent subsidiaries) there shall be inserted the following subsection—

“(6A)

If, before the time by reference to which the chargeable increase is determined, an event occurs by virtue of which the person making the acquisition becomes chargeable to tax under section 140A(4) of the Taxes Act 1988 (employee’s interest in shares ceasing to be only conditional) on any amount (“the charged amount") in respect of the shares, the amount on which tax is chargeable by virtue of this section shall be reduced by the charged amount.”

After the section 140C of the Taxes Act 1988 inserted by section 50 above there shall be inserted the following sections—

“140D Convertible shares.

(1)

This section applies where a person (“the employee") has acquired convertible shares in a company as a director or employee of that or another company.

(2)

For the purposes of this section shares are convertible wherever they—

(a)

confer on the holder an immediate or conditional entitlement to convert them into shares of a different class; or

(b)

are held on terms that authorise or require the grant of such an entitlement to the holder if certain circumstances arise, or do not arise.

(3)

The employee shall be chargeable to tax under Schedule E if, at a time when he has a beneficial interest in them, the shares are converted into shares of a different class in pursuance of any entitlement to convert them that has been conferred on the holder.

(4)

A charge by virtue of this section shall be a charge for the year of assessment in which the conversion occurs on the amount of the gain from the conversion.

(5)

The amount of the gain from the conversion is the amount (if any) by which the market value at the time of the conversion of the shares into which the convertible shares are converted exceeds the sum of the deductible amounts.

(6)

The deductible amounts are—

(a)

the amount or value of any consideration given for the convertible shares;

(b)

the amount or value of any consideration given for the conversion in question;

(c)

any amounts on which the employee has become chargeable to tax under Schedule E in respect of his acquisition of those shares;

(d)

any amounts on which the employee has, by reference to an event occurring not later than the time of the conversion, become chargeable to tax in respect of the shares under section 78 or 79 of the M40Finance Act 1988 (unapproved employee share schemes);

(e)

if the convertible shares were acquired through a series of conversions each of which was a taxable conversion, the amount of the gain from each conversion, so far as not falling within paragraph (c) above.

(7)

In subsection (6) above the reference to a taxable conversion is a reference to any conversion which—

(a)

gave rise to a gain on which the employee was chargeable to tax by virtue of this section, or

(b)

would have given rise to such a gain but for the fact that the market value of the shares at the time of the conversion did not exceed the sum of the deductible amounts.

(8)

Tax shall not be chargeable by virtue of this section if—

(a)

the conversion is a conversion of shares of one class only (“the original class") into shares of one other class only (“the new class");

(b)

all shares of the original class are converted into shares of the new class; and

(c)

one of the conditions in subsection (9) below is fulfilled.

(9)

The conditions referred to in subsection (8) above are—

(a)

that immediately before the conversion the majority of the company’s shares of the original class are held otherwise than by or for the benefit of—

(i)

directors or employees of the company;

(ii)

an associated company of the company; or

(iii)

directors or employees of such an associated company;

and

(b)

that immediately before the conversion the company is employee-controlled by virtue of holdings of shares of the original class.

(10)

Tax shall not be chargeable by virtue of this section where the interest which the employee acquires in the shares into which the convertible shares are converted is an interest which (within the meaning given for the purposes of section 140A by section 140C) is only conditional.

140E Consideration for convertible shares.

(1)

This section applies in relation to any shares for determining the amount or value of the consideration referred to in section 140D(6)(a) or (b).

(2)

Subject to the following provisions of this section, the consideration referred to in section 140D(6)(a) is any consideration given by—

(a)

the employee; or

(b)

in a case where section 140H(1)(b) applies and the shares were acquired by another person, that other person,

in respect of the acquisition of the shares.

(3)

The amount or value of the consideration given by any person for any shares shall include the amount or value of any consideration given for a right to acquire those shares.

(4)

Where any consideration is given partly in respect of one thing and partly in respect of another, the amount given in respect of the different things shall be determined on a just and reasonable apportionment.

(5)

The consideration which for the purposes of this section is taken to be given wholly or partly for anything shall not include the performance of any duties of or in connection with the office or employment by reference to which the shares in question have been acquired by a person as a director or employee of a company.

(6)

No amount shall be counted more than once in the computation of the amount or value of any consideration.

(7)

Subsections (1) to (3) of section 136 shall apply for determining for the purposes of subsection (3) above the amount or value of the consideration given for a right to acquire any shares as they apply for determining such an amount for the purposes of section 135.

140F Supplemental provision with respect to convertible shares.

(1)

Where—

(a)

a person has an interest in any convertible shares at the time of his death,

(b)

those shares are converted into shares of a different class either on his death or within the following twelve months, and

(c)

the conversion takes place wholly or partly as a consequence of his death,

section 140D shall have effect as if the conversion had taken place immediately before his death and had been in pursuance of an entitlement to convert conferred on the deceased.

(2)

In section 140D(2) the references, in relation to the terms of a person’s entitlement, to circumstances arising include references—

(a)

to the expiration of a period specified in or determined under those terms or the death of that person or any other person; and

(b)

to the exercise by any person of any power conferred on him by or under those terms.

(3)

For the purposes of section 140D, the market value of any shares at any time is the amount that might reasonably be expected to be obtained from a sale of the shares in the open market at that time.

(4)

In this section and section 140D “associated company” has the same meaning as it has for the purposes of Part XI by virtue of section 416.

(5)

For the purposes of section 140D a company is employee-controlled by virtue of holdings of shares of a class if—

(a)

the majority of the company’s shares of that class (other than any held by or for the benefit of an associated company) are held by or for the benefit of employees or directors of the company or a company controlled by the company; and

(b)

those directors and employees are together able as holders of the shares to control the company.

(6)

The provisions of sections 140D and 140E and this section apply in relation to an interest in shares as they apply in relation to shares.

(7)

Section 840 (control) applies for the purposes of this section.”

Before subsection (7) of section 79 of the M41Finance Act 1988 (charge for shares in dependent subsidiaries) there shall be inserted the following subsection—

“(6B)

If, before the time by reference to which the chargeable increase is determined, an event occurs by virtue of which the person making the acquisition becomes chargeable to tax under section 140D(3) of the Taxes Act 1988 (charge on conversion of convertible shares) on any amount (“the charged amount") in respect of the shares, the amount on which tax is chargeable by virtue of this section shall be reduced by the charged amount.”

After the section 140F of the Taxes Act 1988 inserted by section 51 above there shall be inserted the following section—

“140G Information for the purposes of sections 140A to 140F.

(1)

Where—

(a)

any person provides any individual with an interest in shares which is only conditional, and

(b)

the circumstances are such that—

(i)

the acquisition of that interest by that individual,

(ii)

its subsequently ceasing to be only conditional,

(iii)

its subsequent disposal, or

(iv)

the death of the individual,

gives rise or may give rise to a charge under section 140A on that individual,

each of the relevant persons shall deliver to an officer of the Board particulars in writing of the interest and its provision.

(2)

Where—

(a)

a person has an interest in any shares which is only conditional,

(b)

those shares cease to be shares in which that person’s interest is only conditional or are disposed of or that person dies, and

(c)

that event gives rise to a charge under section 140A(4),

each of the relevant persons shall deliver to an officer of the Board particulars in writing of the shares and the event.

(3)

Where—

(a)

any person has provided any individual with any convertible shares in a company,

(b)

those shares are subsequently converted into shares of a different class, and

(c)

the circumstances are such that the conversion gives rise or may give rise to a charge under section 140D on that individual,

each of the relevant persons shall deliver to an officer of the Board particulars in writing of the shares and their conversion.

(4)

For the purposes of this section the relevant persons are—

(a)

the person who is providing, or who provided, the shares in question; and

(b)

the person under or with whom the office or employment is or was held by reference to which the charge may arise or has arisen.

(5)

Particulars required to be delivered under this section must be delivered no later than thirty days after the end of the year of assessment in which the interest is provided, the event occurs or the conversion takes place.

(6)

Expressions used in this section and in section 140A or 140D above have the same meanings in this section as in section 140A or, as the case may be, section 140D.”

In the second column of the Table in section 98 of the M42Taxes Management Act 1970 (penalties for failure to furnish information), after the entry relating to section 136(6) of the Taxes Act 1988 there shall be inserted the following entry—

“section 140G;”.

After subsection (5) of section 120 (increase of expenditure by reference to tax charged in relation to shares) there shall be inserted the following subsections—

“(5A)

Where an amount is chargeable to tax under section 140A of the Taxes Act in respect of—

(a)

the acquisition or disposal of any interest in shares, or

(b)

any interest in shares ceasing to be only conditional,

the relevant amount is a sum equal to the amount so chargeable.

(5B)

Where an amount is chargeable to tax under section 140D of the Taxes Act in respect of the conversion of shares, the relevant amount is a sum equal to the amount so chargeable.”

After that subsection there shall be inserted the following subsection—

“(8)

For the purposes of subsection (5A) above this section shall have effect as if references in this section to shares included anything referred to as shares in section 140A of the Taxes Act.”

After section 149A there shall be inserted the following section—

“149B Employee incentive schemes: conditional interests in shares.

(1)

Where—

(a)

an individual has acquired an interest in any shares or securities which is only conditional,

(b)

that interest is one which for the purposes of section 140A of the Taxes Act is taken to have been acquired by him as a director or employee of a company, and

(c)

by virtue of section 17(1)(b) the acquisition of that interest would, apart from this section, be an acquisition for a consideration equal to the market value of the interest,

section 17 shall not apply for calculating the consideration.

(2)

Instead, the consideration for the acquisition shall be taken (subject to section 120) to be equal to the actual amount or value of the consideration given for that interest as computed in accordance with section 140B of the Taxes Act.

(3)

This section shall apply in relation only to the individual making the acquisition and, accordingly, shall be disregarded in calculating the consideration received by the person from whom the interest is acquired.

(4)

Expressions used in this section and in section 140A of the Taxes Act have the same meanings in this section as in that section.”

In section 559 of the Taxes Act 1988 (deductions on account of tax etc. from payments to certain sub-contractors), in subsection (1), for “subsection (2) below" there shall be substituted “ the following provisions of this section ”; and after subsection (1) there shall be inserted the following subsection—

“(1A)

Subsection (1) above shall not apply to any payment made under the contract in question that is chargeable to income tax under Schedule E by virtue of section 134(1).”

For section 148 of the Taxes Act 1988 (payments on retirement or removal from office or employment) substitute—

“148 Payments and other benefits in connection with termination of employment, etc.

(1)

Payments and other benefits not otherwise chargeable to tax which are received in connection with—

(a)

the termination of a person’s employment, or

(b)

any change in the duties of or emoluments from a person’s employment,

are chargeable to tax under this section if and to the extent that their amount exceeds £30,000.

(2)

For the purposes of this section a “benefit” includes anything which, if received for performance of the duties of the employment—

(a)

would be an emolument of the employment, or

(b)

would be chargeable to tax as an emolument of the employment,

or which would be such an emolument, or so chargeable, apart from any exemption.

(3)

An amount chargeable to tax under this section is income chargeable under Schedule E for the year of assessment in which the payment or other benefit is received.

The right to receive the payments or other benefits is not itself regarded as a benefit for this purpose.

(4)

For the purposes of this section—

(a)

a cash benefit is treated as received—

(i)

when payment is made of or on account of the benefit, or

(ii)

when the recipient becomes entitled to require payment of or on account of the benefit; and

(b)

a non-cash benefit is treated as received when it is used or enjoyed.

(5)

This section applies—

(a)

whether the payment or other benefit is provided by the employer or former employer or by another person, and

(b)

whether or not the payment or other benefit is provided in pursuance of a legal obligation.

(6)

This section has effect subject to Schedule 11, which contains provisions extending, restricting and otherwise supplementing the provisions of this section.

(7)

In this section and that Schedule “employment” includes an office and related expressions have a corresponding meaning.”.

In section 158 of the Taxes Act 1988 (car fuel) for the Tables in subsection (2) (tables of cash equivalents) there shall be substituted—

“ TABLE A

Cylinder capacity of car in cubic centimetres	Cash equivalent
1,400 or less	£1,010
More than 1,400 but not more than 2,000	£1,280
More than 2,000	£1,890

TABLE AB

Cylinder capacity of car in cubic centimetres	Cash equivalent
2,000 or less	£1,280
More than 2,000	£1,890

TABLE B

Description of car	Cash equivalent
Any car	£1,890”

After section 168AA of that Act there shall be inserted the following section—

“168AB Equipment etc. to enable car to run on road fuel gas.

(1)

Equipment by means of which the car is capable of running on road fuel gas shall not be regarded as an accessory for the purposes of section 168A.

(2)

Where the car is manufactured in such way as to be capable of running on road fuel gas, the price of the car as regards each relevant year shall be treated as the price given by section 168A, reduced by so much of that price as it is reasonable to attribute to the car’s being manufactured in that way rather than in such a way as to be capable of running only on petrol.

(3)

In this section “road fuel gas” means any substance which is gaseous at a temperature of 15°C and under a pressure of 1013.25 millibars, and which is for use as fuel in road vehicles.”

For subsections (1) to (1B) of section 198 of the Taxes Act 1988 (relief for necessary expenses) substitute—

“(1)

If the holder of an office or employment is obliged to incur and defray out of the emoluments of the office or employment—

(a)

qualifying travelling expenses, or

(b)

any amount (other than qualifying travelling expenses) expended wholly, exclusively and necessarily in the performance of the duties of the office or employment,

there may be deducted from the emoluments to be assessed the amount so incurred and defrayed.

(1A)

“Qualifying travelling expenses” means—

(a)

amounts necessarily expended on travelling in the performance of the duties of the office or employment, or

(b)

other expenses of travelling which—

(i)

are attributable to the necessary attendance at any place of the holder of the office or employment in the performance of the duties of the office or employment, and

(ii)

are not expenses of ordinary commuting or private travel.

What is ordinary commuting or private travel for this purpose is defined in Schedule 12A.

(1B)

Expenses of travel by the holder of an office or employment between two places at which he performs duties of different offices or employments under or with companies in the same group are treated as necessarily expended in the performance of the duties which he is to perform at his destination.

For this purpose companies are taken to be members of the same group if, and only if, one is a 51 per cent. subsidiary of the other or both are 51 per cent. subsidiaries of a third company.”.

Before that section insert—

“192A Foreign earnings deduction for seafarers.

(1)

Where in any year of assessment—

(a)

the duties of an employment as a seafarer are performed wholly or partly outside the United Kingdom, and

(b)

any of those duties are performed in the course of a qualifying period (within the meaning of Schedule 12) which falls wholly or partly in that year and consists of at least 365 days,

then, in charging tax under Case I of Schedule E on the amount of the emoluments from that employment attributable to that period, or to so much of it as falls in that year of assessment, there shall be allowed a deduction equal to the whole of that amount.

(2)

In subsection (1) employment “as a seafarer” means an employment consisting of the performance of duties on a ship (or of such duties and others incidental to them).

(3)

For the purposes of this section a “ship” does not include—

(a)

any offshore installation within the meaning of the M47Mineral Workings (Offshore Installations) Act 1971, or

(b)

what would be such an installation if the references in that Act to controlled waters were to any waters.

(4)

Schedule 12 has effect for the purpose of supplementing this section.”.

The first modification is the insertion in subsection (2), before the word “and" at the end of paragraph (b), of the following paragraph—

“(ba)

an asset not falling within paragraph (a) or (b) above which consists in the rights of an assignee, or any other rights, in respect of a trade debt that is or may become due to the employer;”.

The second modification is the insertion in subsection (3), before the word “and" at the end of paragraph (a), of the following paragraph—

“(aa)

in the case of an asset falling within subsection (2)(ba) above, the amount of the debt;”.

For subsections (2) and (3) (meaning of “tradeable asset" and amount of deemed payment) there shall be substituted the following subsections—

“(2)

In this section “readily convertible asset” means—

(a)

an asset capable of being sold or otherwise realised on a recognised investment exchange (within the meaning of the M48Financial Services Act 1986) or on the London Bullion Market;

(b)

an asset capable of being sold or otherwise realised on a market for the time being specified in PAYE regulations;

(c)

an asset consisting in the rights of an assignee, or any other rights, in respect of a money debt that is or may become due to the employer or any other person;

(d)

an asset consisting in, or in any right in respect of, any property that is subject to a fiscal warehousing regime;

(e)

an asset consisting in anything that is likely (without anything being done by the employee) to give rise to, or to become, a right enabling a person to obtain an amount or total amount of money which is likely to be similar to the expense incurred in the provision of the asset;

(f)

an asset for which trading arrangementrposes of this section trading arrangements for any asset provided to any person exist whenever there exist any arrangements the effect of which in relation to that asset is to enable that person, or a member of his family or household, to obtain an amount or total amount of money that is, or is likely to be, similar to the expense incurred in the provision of that asset.

(g)

an asset for which trading arrangements are likely to come into existence in accordance with any arrangements of another description existing when the asset is provided or with any understanding existing at that time.

(3)

The amount referred to is the amount which, on the basis of the best estimate that can be reasonably be made, is the amount of income likely to be chargeable to tax under Scheule E in respect of the provision of the asset.

(3A)

For the purposes of this section trading arrangements for any asset provided to any person exist whenever there exist any arrangements the effect of which in relation to that asset is to enable that person, or a member of his family or household, to obtain an amount or total amount of money that is, or is likely to be, similar to the expense incurred in the provision of that asset.

(3B)

References in this section to enabling a person to obtain an amount of money shall be construed—

(a)

as references to enabling an amount to be obtained by that person by any means at all, including, in particular—

(i)

by using any asset or other property as security for a loan or advance, or

(ii)

by using any rights comprised in or attached to any asset or other property to obtain any asset for which trading arrangements exist;

and

(b)

as including references to cases where a person is enabled to obtain an amount as a member of a class or description of persons, as well as where he is so enabled in his own right.

(3C)

For the purposes of this section an amount is similar to the expense incurred in the provision of any asset if it is, or is an amount of money equivalent to—

(a)

the amount of the expense so incurred; or

(b)

a greater amount; or

(c)

an amount that is less than that amount but not substantially so.”

After subsection (5) there shall be inserted the following subsection—

“(6)

In this section—

“EEA State” means a State which is a Contracting Party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993;

“family or household” has the same meaning as it has, by virtue of section 168(4), in Chapter II of this Part;

“fiscal warehousing regime” means—

(a)

a warehousing regime or fiscal warehousing regime (within the meaning of sections 18 to 18F of the M49Value Added Tax Act 1994); or

(b)

any corresponding arrangements in an EEA State other than the United Kingdom;

“money” includes money expressed in a currency other than sterling or in the European currency unit (as for the time being defined in Council Regulation No. 3180/78/EEC or any Community instrument replacing it); and

“money debt” means any obligation which falls to be, or may be, settled—

(a)

by the payment of money, or

(b)

by the transfer of a right to settlement under an obligation which is itself a money debt.”

After section 203F of the Taxes Act 1988 there shall be inserted the following section—

“203FAPAYE: enhancing the value of an asset.

(1)

Where—

(a)

any assessable income of an employee is provided in the form of anything enhancing the value of an asset in which the employee or a member of his family or household already has an interest, and

(b)

that asset, with its value enhanced, would be treated as a readily convertible asset for the purposes of section 203F if assessable income were provided to the employee in the form of that asset at the time of the enhancement,

that section shall have effect (subject to subsection (2) below) as if the employee had been provided, at that time, with assessable income in the form of the asset (with its value enhanced), instead of with whatever enhanced its value.

(2)

Where section 203F has effect in accordance with subsection (1) above, subsection (3) of that section shall apply as if the reference in subsection (3) of that section to the provision of the asset were a reference to the enhancement of its value.

(3)

Subject to subsection (4) below, any reference in this section to enhancing the value of an asset is a reference to—

(a)

the provision of any services by which that asset or any right or interest in it is improved or otherwise made more valuable,

(b)

the provision of any property the addition of which to the asset in question improves it or otherwise increases its value, or

(c)

the provision of any other enhancement by the application of money or property to the improvement of the asset in question or to securing an increase in its value or in the value of any right or interest in it.

(4)

PAYE regulations may make provision excluding such matters as may be described in the regulations from the scope of what constitutes enhancing the value of an asset for the purposes of this section.

(5)

Expressions used in this section and in section 203F have the same meanings in this section as in that section.”

After the section 203FA of the Taxes Act 1988 that is inserted by section 66 above there shall be inserted the following section—

“203FBPAYE: gains from share options etc.

(1)

This section applies where an event occurs by virtue of which an amount is assessable on any person (“the relevant person") by virtue of section 135, 140A(4) or 140D.

(2)

If that event is the exercise of a right to acquire shares, section 203F shall have effect, subject to subsection (7) below, as if the relevant person were being provided—

(a)

at the time he acquires the shares in exercise of that right, and

(b)

in respect of the office or employment by reason of which he was granted the right,

with assessable income in the form of those shares.

(3)

If that event is the assignment or release of a right to acquire shares, sections 203 to 203F shall have effect, subject to subsection (7) below—

(a)

in so far as the consideration for the assignment or release takes the form of a payment, as if so much of that payment as does not exceed the amount assessable by virtue of section 135 were a payment of assessable income of the relevant person; and

(b)

in so far as that consideration consists in the provision of an asset, as if the provision of that asset were the provision—

(i)

to the relevant person, and

(ii)

in respect of the office or employment by reason of which he was granted the right,

of assessable income in the form of that asset.

(4)

If that event is an event falling within subsection (4)(a) or (b) of section 140A, sections 203 to 203F shall have effect, subject to subsection (7) below, as if—

(a)

the provision to the relevant person of the employee’s interest in the shares included the provision to him at the time of the event of a further interest in those shares; and

(b)

the further interest were not subject to any terms by virtue of which it would fall for the purposes of section 140A to be treated as only conditional.

(5)

If that event is an event falling within subsection (3) of section 140D, sections 203 to 203F shall have effect, subject to subsection (7) below, as if the original provision to the relevant person of the convertible shares or securities included the provision to him at the time of the event of the shares or securities into which they are converted.

(6)

Subsection (5) above shall apply in a case where the convertible shares or securities were themselves acquired by means of a taxable conversion (as defined in section 140D(7)), or by a series of such conversions, as if the reference to the original provision of the convertible shares or securities were a reference to the provision of the shares or securities which were converted by the earlier or earliest conversion.

(7)

Where section 203F has effect in accordance with any of the preceding provisions of this section, subsection (3) of section 203F shall apply as if the reference in that subsection to the amount of income likely to be chargeable to tax under Schedule E in respect of the provision of the asset were a reference to the amount on which tax is likely to be chargeable by virtue of section 135, 140A or 140D in respect of the event in question.

(8)

PAYE regulations may make provision for excluding payments from the scope of subsection (3)(a) above in such circumstances as may be specified in the regulations.

(9)

In this section “asset” means—

(a)

any asset within the meaning of section 203F; or

(b)

any non-cash voucher, credit-token or cash voucher (as defined for the purposes of section 141, 142 or, as the case may be, 143).

(10)

Expressions used in this section and in any of sections 135 and 140A to 140H have the same meanings in this section as in that section, and any reference in this section to—

(a)

an event falling within subsection (4)(a) or (b) of section 140A, or

(b)

an event falling within subsection (3) of section 140D,

includes a reference to an event which is treated for the purposes of that section as such an event by virtue of section 140A(8) or 140F(1).”

For subsections (3) and (4) of section 203G of the Taxes Act 1988 (conditions for the receipt of a non-cash voucher to be treated as a payment for PAYE purposes) there shall be substituted the following subsections—

“(3)

The first condition is fulfilled with respect to a non-cash voucher if it is capable of being exchanged for anything which, if provided to the employee at the time when the voucher is received, would fall to be regarded as a readily convertible asset for the purposes of section 203F.

(4)

The second condition is fulfilled with respect to a non-cash voucher if (but for section 203F(4)(b)) it would itself fall to be regarded as a readily convertible asset for the purposes of section 203F.

(5)

Subsection (5) of section 141 (time of receipt of voucher appropriated to employee) shall apply for the purposes of this section as it applies for the purposes of subsections (1) and (2) of that section.”

In subsection (1) of section 203H of that Act (use of credit tokens to be treated as payment for PAYE purposes), for paragraph (b) there shall be substituted—

“(b)

anything which, if provided to the employee at the time when the credit-token is used, would fall to be regarded as a readily convertible asset for the purposes of section 203F,”; and subsection (2) of that section shall cease to have effect.

In section 203I of that Act (cash vouchers), after subsection (2) there shall be inserted the following subsection—

“(3)

Subsection (2) of section 143 (time of receipt of voucher appropriated to employee) shall apply for the purposes of this section as it applies for the purposes of subsections (1) and (5) of that section.”

In that section, the following subsections shall be inserted after subsection (3)—

“(3A)

Where, by virtue of any of sections 203F to 203I, an employer would be treated for the purposes of PAYE regulations (if they applied to him) as making a payment of any amount to an employee, this section shall have effect—

(a)

as if the employer were also to be treated for the purposes of this section as making an actual payment of that amount; and

(b)

as if paragraph (a) of subsection (3) above were omitted.

(3B)

References in this section to the making of any payment by an intermediary of the relevant person shall be construed in accordance with subsection (4) of section 203B as if references in that subsection to the employer were references to the relevant person.”

For subsections (1) and (2) of section 203L of that Act (interpretation) there shall be substituted the following subsections—

“(1)

Subject to subsections (1A) and (1B) below and section 203J(2)(b), in sections 203B to 203J—

“employee” means a person who holds or has held any office or employment under or with another person; and

“employer”—

(a)

in relation to an employee, means a person under or with whom that employee holds or has held an office or employment; and

(b)

in relation to any assessable income of an employee, means the person who is the employer of that employee in relation to the office or employment in respect of which that income is or was provided or, as the case may be, by reference to which it falls to be regarded as assessable.

(1A)

Subject to subsection (1B) below, where the remuneration receivable by an individual under or in consequence of any contract falls to be treated under section 134 (agency workers) as the emoluments of an office or employment, sections 203B to 203K (except section 203E) shall have effect as if that person held that office or employment under or with the agency.

(1B)

Where—

(a)

the remuneration receivable by an individual under or in consequence of any contract falls to be so treated under section 134, and

(b)

a payment of, or on account of, assessable income of that individual is made by a person acting on behalf of the client and at the expense of the client or a person connected with the client,

section 203B and, in relation to any payment treated as made by the client under section 203B, section 203J shall have effect in relation to that payment as if the client and not the agency were the employer for the purposes of sections 203B to 203K.

(1C)

In subsections (1A) and (1B) above “the agency” and “the client” have the same meanings as in section 134; and section 839 applies for the purposes of those subsections.

(2)

In sections 203B to 203K and in this section “assessable” means assessable to income tax under Schedule E.”

After section 299A of the Taxes Act 1988 there shall be inserted the following section—

“299B Pre-arranged exits.

(1)

An individual is not eligible for relief in respect of any shares in a company if the relevant arrangements include—

(a)

arrangements with a view to the subsequent repurchase, exchange or other disposal of those shares or of other shares in or securities of the same company;

(b)

arrangements for or with a view to the cessation of any trade which is being or is to be or may be carried on by the company or a person connected with the company;

(c)

arrangements for the disposal of, or of a substantial amount of, the assets of the company or of a person connected with the company;

(d)

arrangements the main purpose of which, or one of the main purposes of which, is (by means of any insurance, indemnity or guarantee or otherwise) to provide partial or complete protection for persons investing in shares in that company against what would otherwise be the risks attached to making the investment.

(2)

The arrangements referred to in subsection (1)(a) above do not include any arrangements with a view to such an exchange of shares, or shares and securities, as is mentioned in section 304A(1).

(3)

The arrangements referred to in subsection (1)(b) and (c) above do not include any arrangements applicable only on the winding up of a company except in a case where—

(a)

the relevant arrangements include arrangements for the company to be wound up; or

(b)

the company is wound up otherwise than for bona fide commercial reasons.

(4)

The arrangements referred to in subsection (1)(d) above do not include any arrangements which are confined to the provision—

(a)

for the company itself, or

(b)

in the case of a company which is a parent company of a trading group, for the company itself, for the company itself and one or more of its subsidiaries or for one or more of its subsidiaries,

of any such protection against the risks arising in the course of carrying on its business as it might reasonably be expected so to provide in normal commercial circumstances.

(5)

The reference in subsection (4) above to the parent company of a trading group shall be construed in accordance with the provision contained for the purposes of section 293 in that section.

(6)

In this section “the relevant arrangements” means—

(a)

the arrangements under which the shares are issued to the individual; and

(b)

any arrangements made before the issue of the shares to him in relation to or in connection with that issue.

(7)

In this section “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.”

For subsection (6) of that section there shall be substituted the following subsection—

“(6)

For the purposes of subsection (5) above the persons who are persons concerned are—

(a)

in relation to section 289(6), the claimant, the company and any person controlling the company;

(b)

in relation to section 291B(5), the claimant;

(c)

in relation to section 293(8) or 308(2)(e), the company and any person controlling the company; and

(d)

in relation to section 299B(1), the claimant, the company and any person connected with the company;

and for those purposes references in this subsection to the claimant include references to any person to whom the claimant appears to have made a transfer such as is mentioned in section 304(1) of any of the shares in question.”

After paragraph 10 of Schedule 28B to the Taxes Act 1988 there shall be inserted the following paragraph—

“ Requirement that securities should not relate to a guaranteed loan

10A

(1)

The requirement of this paragraph is that there are no securities relating to a guaranteed loan in the relevant holding.

(2)

For the purposes of this paragraph a security relates to a guaranteed loan if (and only if) there are arrangements for the trust company to be or become entitled, in the event of a failure by any person to comply with—

(a)

the terms of the loan to which the security relates, or

(b)

the terms of the security,

to receive anything (whether directly or indirectly) from a third party.

(3)

For the purposes of sub-paragraph (2) above it shall be immaterial whether the arrangements apply in all cases of a failure to comply or only in certain such cases.

(4)

For the purposes of this paragraph “third party” means any person except—

(a)

the relevant company; and

(b)

if the relevant company is the parent company of a trading group for the purposes of paragraph 3 above, the subsidiaries of the relevant company.”

After the paragraph 10A inserted by subsection (1) above there shall be inserted the following paragraph—

“10B Requirement that a proportion of the holding in each company must be eligible shares

(1)

The requirement of this paragraph is that eligible shares represent at least 10 per cent. by value of the totality of the shares in or securities of the relevant company (including the relevant holding) which are held by the trust company.

(2)

For the purposes of this paragraph the value at any time of any shares in or securities of a company shall be taken (subject to sub-paragraph (4) below) to be their value immediately after—

(a)

any relevant event occurring at that time; or

(b)

where no relevant event occurs at that time, the last relevant event to occur before that time.

(3)

In sub-paragraph (2) above “relevant event”, in relation to any shares in or securities of the relevant company, means—

(a)

the acquisition by the trust company of those shares or securities;

(b)

the acquisition by the trust company of any other shares in or securities of the relevant company which—

(i)

are of the same description as those shares or securities, and

(ii)

are acquired otherwise than by virtue of being allotted to the trust company without that company’s becoming liable to give any consideration;

or

(c)

the making of any such payment in discharge, in whole or in part, of any obligation attached to any shares in or securities of the relevant company held by the trust company as (by discharging that obligation) increases the value of any such shares or securities.

(4)

If at any time the value of any shares or securities held by the trust company is less than the amount of the consideration given by the trust company for those shares or securities, it shall be assumed for the purposes of this paragraph that the value of those shares or securities at that time is equal to the amount of that consideration.

(5)

In this paragraph “eligible shares” has the same meaning as in section 842AA.”

In paragraph 6 of Schedule 28B to that Act, in sub-paragraphs (1)(b), (2A)(c) and (2B) (requirement as to use of money raised), for “qualifying subsidiary", wherever it occurs, there shall be substituted “ relevant qualifying subsidiary ”; and after sub-paragraph (4) of that paragraph there shall be inserted the following sub-paragraph—

“(5)

For the purposes of this paragraph a company is a relevant qualifying subsidiary of another company at any time when it would be a qualifying subsidiary of that company if “90" were substituted for “75" in every place where “75" occurs in paragraph 10(3) below.”

After subsection (1) of section 333 of the Taxes Act 1988 (investment plans) there shall be inserted the following subsection—

“(1A)

The plans for which provision may be made by the regulations include, in particular, a plan in the form of an account the subscriptions to which are to be invested in one or more of the ways authorised by the regulations; and, accordingly, references in this section, or in any other enactment, to a plan manager include references to the manager of such an account.”

After that paragraph there shall be inserted the following paragraphs—

“(ca)

adapting or modifying the provisions of Chapter II of Part XIII in relation to cases where—

(i)

an investor ceases to be, and is treated as not having been, entitled to relief from tax in respect of investments; or

(ii)

an investor who was not entitled to relief has been given relief on the basis that he was;

(cb)

securing that plan managers (as well as investors) are liable to account for amounts becoming due from investors as a consequence of any regulations made by virtue of paragraph (ca) above;

(cc)

that an investor under a plan or a plan manager is, in prescribed cases where relief has been given to which there was no entitlement, to be liable to a penalty of a prescribed amount, instead of to any obligation to account as mentioned in paragraph (b) or (cb) above;

(cd)

that liabilities equivalent to any of those which, by virtue of any of the preceding paragraphs of this subsection, may be imposed in cases where relief has been given to which there was no entitlement are to arise (in place of the liabilities to tax otherwise arising) in other cases where, in relation to any plan—

(i)

a prescribed contravention of, or failure to comply with, the regulations, or

(ii)

the existence of such other circumstances as may be prescribed,

would have the effect (subject to the provision made by virtue of this paragraph) of excluding or limiting an entitlement to relief;”.

In Chapter IV of Part VII of the Taxes Act 1988, after section 333A there shall be inserted the following section—

“333B Involvement of insurance companies with plans and accounts.

(1)

The Treasury may make regulations providing exemption from tax for income from, and chargeable gains in respect of, investments and deposits of so much of an insurance company’s long term business fund as is referable to section 333 business.

(2)

The Treasury may by regulations modify the effect of section 30(4) of the M54Finance (No. 2) Act 1997 (which repeals section 231(2) of the Taxes Act 1988 with effect from 6th April 1999) in relation to distributions which—

(a)

are made before 6th April 2004; and

(b)

are received by an insurance company in respect of investments of so much of its long term business fund as is referable to section 333 business.

(3)

Regulations under this section may make provision for insurance companies that are not resident in the United Kingdom to be treated, in relation to investments of so much of their long term business funds as are referable to section 333 business—

(a)

as if they were so resident for the purposes of any enactment conferring an entitlement to, or to the payment of, tax credits in respect of investments; and

(b)

as if such other conditions of any entitlement to, or to the payment of, tax credits were also satisfied.

(4)

Regulations under section 333 or this section may include provision which, in relation to insurance companies that are not resident in the United Kingdom—

(a)

requires a person to be appointed to be responsible for securing the discharge of any duties to which such an insurance company is subject under the regulations; and

(b)

confers rights and powers, and imposes liabilities, on a person so appointed;

and, without prejudice to the generality of paragraphs (a) and (b) above, regulations made by virtue of this subsection may include any provision corresponding to any that, in relation to a European institution, may be made under section 333A.

(5)

Regulations under this section may provide that an insurance company—

(a)

shall comply with any notice served on it by the Board which requires it, within a prescribed period, to make available for the Board’s inspection documents (of a prescribed kind) relating to, or to matters connected with, its past or present section 333 business; and

(b)

shall, within a prescribed period of being required to do so by the Board, furnish to the Board information (of a prescribed kind) about its past or present section 333 business or any matters connected with it.

(6)

Any power of the Treasury under this section to make provision by regulations in relation to insurance companies shall include power by regulations to make such corresponding provision in relation to friendly societies as the Treasury think fit.

(7)

Regulations under this section may—

(a)

for purposes connected with any exemption from tax conferred by virtue of subsection (1) above, apply or modify any provision made by or under the Tax Acts;

(b)

make different provision for different cases;

(c)

include such incidental, supplemental, consequential and transitional provision as the Treasury may consider appropriate.

(8)

Without prejudice to the generality of the powers conferred by subsection (7) above, the provision that may be made in connection with an exemption from tax conferred by virtue of subsection (1) above shall include provision for section 436 to apply (with any such modifications as may be prescribed) in relation to section 333 business as it applies in relation to pension business.

(9)

In this section—

“friendly society” has the same meaning as in Chapter II of Part XII;

“insurance company” means an insurance company within the meaning of the M55Insurance Companies Act 1982;

“long term business fund” has the same meaning as in Chapter I of Part XII;

“prescribed” means prescribed by regulations under this section;

“section 333 business”, in relation to an insurance company, means the business of the company that is attributable to the making of investments with that company under plans for which provision is made by regulations under section 333.”

In each of the columns of the Table in section 98 of the M56Taxes Management Act 1970 (penalties for failure to comply with notice or to furnish information), after the entry relating to regulations under section 333 of the Taxes Act 1988 there shall be inserted the following entry—

“regulations under section 333B;”.

After that subsection there shall be inserted the following subsections—

“(1A)

Subsection (1B) below applies where the holding mentioned in subsection (1) above comprises any of the following, namely—

(a)

shares issued before 1st January 1994 in respect of which relief has been given under Chapter III of Part VII and has not been withdrawn;

(b)

shares issued on or after that date to which relief under that Chapter is attributable; and

(c)

shares to which deferral relief (within the meaning of Schedule 5B to the 1992 Act) is attributable.

(1B)

Any such question as is mentioned in subsection (1) above shall not be determined as provided by that subsection, but shall be determined instead—

(a)

in the case of shares issued before 1st January 1994, as provided by subsections (3) to (4C) of section 299 as it has effect in relation to such shares; and

(b)

in the case of shares issued on or after that date, as provided by subsections (6) to (6D) of that section as it has effect in relation to such shares.”

For subsection (4) of that section there shall be substituted the following subsections—

“(4)

For the purposes of sections 573 to 575 and this section a qualifying trading company is a company which at all times in the relevant period has been an unquoted company (within the meaning given by section 312) and which—

(a)

either—

(i)

is an eligible trading company on the date of the disposal; or

(ii)

has ceased to be an eligible trading company at a time which is not more than three years before that date and has not since that time been an excluded company, an investment company or a trading company that is not an eligible trading company; and

(b)

either—

(i)

has been an eligible trading company for a continuous period of six years ending on that date or at that time; or

(ii)

has been an eligible trading company for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company that is not an eligible trading company; and

(c)

has carried on its business wholly or mainly in the United Kingdom throughout the relevant period.

(4A)

A company is an eligible trading company for the purposes of subsection (4) above at any time when, or in any period throughout which, it would comply with the requirements of section 293 if—

(a)

the provisions mentioned in subsection (4B) below were omitted;

(b)

the references in subsection (6) of section 293 to dissolution were omitted and the condition in paragraph (b) of that subsection were a condition that the company continue to be a trading company within the meaning of subsection (5) below;

(c)

the reference in section 293(6A) to the eligible shares were a reference to the shares in respect of which relief is claimed under section 573 or 574;

(d)

any reference in section 293, 297 or 308 to the relevant period were a reference to the time that is relevant for the purposes of subsection (4)(a) above or, as the case may require, the continuous period that is relevant for the purposes of subsection (4)(b) above;

(e)

the reference in section 304A(1)(e)(i) to eligible shares were a reference to shares in respect of which relief is claimed under section 573 or 574;

(f)

references in section 304A(3) to an individual were references to a person;

(g)

the reference in section 304A(4) to section 304 were a reference to section 574(3)(b); and

(h)

the reference in section 304A(6) to the expressions “eligible shares" and “subscriber shares" were a reference to the expression “subscriber shares".

(4B)

The provisions are—

(a)

in section 293, the words “Subject to section 294,” in subsection (1), the words “an unquoted company and be” in subsection (2), and subsections (8A) and (8B);

(b)

sections 294 to 296;

(c)

in section 298(5), the words “and section 312(1A)(b) shall apply to determine the relevant period for the purposes of that section";

(d)

in section 304A, subsections (1)(e)(ii) and (2)(b), in subsection (3), the words “to which relief becomes so attributable" and paragraphs (c) and (d), in subsection (4), the words “to which relief becomes so attributable" and paragraphs (c) and (d), and subsection (5); and

(e)

section 308(5A).”

In section 83 of the M57Finance Act 1996 (non-trading deficit on loan relationships), for subsections (3) and (4) substitute—

“(3)

So much of the deficit for the deficit period as is not the subject of a claim under subsection (2) above shall be carried forward and treated as a deficit for the next accounting period.

(4)

An amount carried forward to an accounting period under subsection (3) above—

(a)

may be the subject of a claim under paragraph (d) of subsection (2) above, but not under any other paragraph of that subsection, and

(b)

shall be disregarded for the purposes of any claim under that subsection relating to a deficit arising in that period.”.

After section 553 of the Taxes Act 1988 (non-resident policies and off-shore capital redemption policies) there shall be inserted—

“553A Overseas life assurance business: life policies.

(1)

A policy of life insurance which, immediately before the happening of a chargeable event or a relevant event—

(a)

is an overseas policy, but

(b)

is not a new non-resident policy,

shall, in relation to that event, be treated for the purposes of this Chapter as if it were a new non-resident policy.

(2)

A policy of life insurance which, immediately before the happening of a relevant event—

(a)

is an overseas policy, and

(b)

is a new non-resident policy,

shall, in relation to that event, be taken for the purposes of this Chapter not to be a qualifying policy.

(3)

Where a chargeable event happens in relation to a new non-resident policy, section 553(7) shall not have effect in relation to the gain treated as arising in connection with the policy on the happening of the chargeable event.

(4)

In this section—

“new non-resident policy” means a new non-resident policy as defined in paragraph 24 of Schedule 15 (and in subsections (2) and (3) above includes a policy treated as such by virtue of subsection (1) above);

“overseas policy” means a policy of life insurance which, by virtue of section 431D(1)(a), forms part of the overseas life assurance business of an insurance company or friendly society;

“relevant event”, in relation to a policy of life insurance, means an event which would be a chargeable event in relation to that policy if the policy were assumed not to be a qualifying policy.

(5)

This section applies in relation to chargeable events and relevant events happening on or after 17th March 1998 in relation to policies of life insurance issued in respect of insurances made on or after that date.

(6)

A policy of life insurance issued in respect of an insurance made before 17th March 1998 shall be treated for the purposes of this section as issued in respect of one made on or after that date if it is varied on or after that date so as to increase the benefits secured or to extend the term of the insurance; and any exercise of rights conferred by the policy shall be regarded for this purpose as a variation.”

After section 553A of the Taxes Act 1988 there shall be inserted—

“553B Overseas life assurance business: capital redemption policies.

(1)

A capital redemption policy which immediately before the happening of a chargeable event—

(a)

is an overseas policy, but

(b)

is not a new offshore capital redemption policy,

shall, in relation to that event, be treated for the purposes of this Chapter as if it were a new offshore capital redemption policy.

(2)

In this section—

“new offshore capital redemption policy” has the same meaning as in section 553;

“overseas policy” means a capital redemption policy which, by virtue of section 431D(1)(a), forms part of the overseas life assurance business of an insurance company.

(3)

This section applies in relation to capital redemption policies where the contract is made after the coming into force of the first regulations under section 458A in consequence of which capital redemption business forms part of the overseas life assurance business of an insurance company.”

In Schedule 19AB to the Taxes Act 1988 (provisional repayments with respect to pension business) in paragraph 3 (recovery of excessive repayments) after sub-paragraph (1) there shall be inserted—

“(1ZA)

In its application by sub-paragraph (1) above, section 30 of the Management Act shall have effect as if, instead of the provision made by subsection (5), it provided that an assessment under that section by virtue of sub-paragraph (1) above is not out of time under section 34 of that Act if it is made no later than the end of the accounting period following that in which the assessment mentioned in paragraph (a) of that sub-paragraph is finally determined.”

In section 596A(4) of the Taxes Act 1988 (charge to tax on benefits under non-approved schemes: amount charged to tax), for paragraph (b) substitute—

“(b)

in the case of a non-cash benefit, whichever is the greater of—

(i)

the amount which would be chargeable to tax under section 19(1) if the benefit were taxable as an emolument of the employment under Case I of Schedule E, or

(ii)

the cash equivalent of the benefit determined in accordance with section 596B.”.

In section 596B(9) of that Act (supplementary provisions: person by whom expenditure incurred on improvement of living accommodation), for paragraph (b) substitute—

“(b)

the employer or former employer; or

(c)

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

After section 596B of that Act insert—

“596C Notional interest treated as paid if amount charged in respect of beneficial loan.

(1)

This section applies where a person is chargeable to tax under section 596A in any year of assessment on an amount which consists of or includes an amount representing the cash equivalent of the benefit of a loan determined (by virtue of section 596B(1)(a)) in accordance with Part II of Schedule 7.

(2)

Where this section applies, the person chargeable is treated as having paid interest on the loan of the same amount as the cash equivalent so determined.

(3)

The interest is treated as paid for all the purposes of the Tax Acts (other than those relating to the charge under section 596A) but not so as to make it—

(a)

income of the person making the loan, or

(b)

relevant loan interest to which section 369 applies (mortgage interest payable under deduction of tax).

(4)

The interest is treated as accruing during and paid at the end of the year of assessment or, if different, the period in that year during which the loan is outstanding.”.

After section 638 of the Taxes Act 1988 there shall be inserted the following section—

“638A Power to prescribe restrictions on approval.

(1)

The Board—

(a)

may by regulations restrict their discretion to approve a personal pension scheme; and

(b)

shall not approve any such scheme if to do so would be inconsistent with any regulations under this section.

(2)

The restrictions that may be imposed by regulations under this section may be imposed by reference to any one or more of the following, that is to say—

(a)

the benefits for which the scheme provides;

(b)

the investments held for the purposes of the scheme;

(c)

the manner in which the scheme is administered;

(d)

any other circumstances whatever.

(3)

The following provisions of this section apply where—

(a)

any regulations are made under this section imposing a restriction (“the new restriction") on the Board’s discretion to approve a personal pension scheme;

(b)

the new restriction did not exist immediately before the making of the regulations; and

(c)

that restriction is one imposed by reference to circumstances other than the benefits for which the scheme provides.

(4)

Subject to subsections (5) and (6) below, a personal pension scheme which is an approved scheme immediately before the day on which the regulations imposing the new restriction come into force shall cease to be approved at the end of the period of 36 months beginning with that day if, at the end of that period, the scheme—

(a)

contains a provision of a prohibited description, or

(b)

does not contain every provision which is a provision of a required description.

(5)

The Board may by regulations provide that subsection (4) above is not to apply in the case of the inclusion of such provisions of a prohibited description, or in the case of the omission of such provisions of a required description, as may be specified in the regulations.

(6)

For the purposes of subsection (4) above—

(a)

a provision contained in a scheme shall not be treated as being of a prohibited description to the extent that it authorises the retention of an investment held immediately before the day of the making of the new regulations; and

(b)

so much of any provision contained in a scheme as authorises the retention of an investment held immediately before that day shall be disregarded in determining if any provision of the scheme is of a required description.

(7)

In this section—

(a)

references to a provision of a prohibited description are references to a provision of a description which, by virtue of the new restriction, is a description of provision which, if contained in a personal pension scheme, would prevent the Board from approving it; and

(b)

references to a provision of a required description are references to a provision of a description which, by virtue of the new restriction, is a description of provision which must be contained in a personal pension scheme before the Board may approve it.”

After section 650 of the Taxes Act 1988 (withdrawal of approval) there shall be inserted the following section—

“650A Charge on withdrawal of approval from arrangements.

(1)

Where any personal pension arrangements cease to be approved arrangements by virtue of the exercise by the Board of their power under section 650(2), tax shall be charged in accordance with this section.

(2)

The tax shall be charged under Case VI of Schedule D at the rate of 40 per cent. on an amount equal to the value (taking that value at the relevant time) of the appropriate part of the assets held at that time for the purposes of the relevant scheme.

(3)

In subsection (2) above—

“the appropriate part”, in relation to the value of any assets, is so much of those assets as is properly attributable, in accordance with the provisions of the scheme and any just and reasonable apportionment, to the arrangements in question; and

“the relevant time” means the time immediately before the date from which the Board’s approval is withdrawn.

(4)

Subject to subsection (5) below, the person liable for the tax charged under this section shall be the scheme administrator for the relevant scheme.

(5)

If, in any case where an amount of tax has been charged under this section and has not been paid—

(a)

there is at any time no person who, as the scheme administrator for the relevant scheme, may be assessed to that amount of tax, or is liable to pay it,

(b)

the scheme administrator for that scheme cannot for the time being be traced,

(c)

there has been such a failure by the scheme administrator for that scheme to meet a liability to pay that amount as the Board consider to be a failure of a serious nature, or

(d)

it appears to the Board that a liability of the scheme administrator for that scheme to pay that amount of tax is a liability that he will be, or (were there an assessment) would be, unable to meet out of assets held in accordance with the scheme for the purposes of those arrangements,

the Board shall be entitled to assess the unpaid tax on the person who made the arrangements in question as if the tax charged under this section, to the extent that it is unpaid, were assessable under this section on that person, instead of on the scheme administrator.

(6)

An assessment to tax made by virtue of subsection (5)(c) above shall not be out of time if it is made within three years after the date on which the tax which the scheme administrator has failed to pay first became due from him.

(7)

For the purposes of this section the value of an asset is, subject to subsection (8) below, its market value, construing “market value" in accordance with section 272 of the 1992 Act.

(8)

Where an asset held for the purposes of a scheme is a right or interest in respect of any money lent (directly or indirectly) to any person mentioned in subsection (9) below, the value of the asset shall be treated as being the amount owing (including any unpaid interest) on the money lent.

(9)

Those persons are—

(a)

the person who (whether or not before the making of the loan) made the arrangements in relation to which the Board’s approval has been withdrawn;

(b)

any other person who has at any time (whether or not before the making of the loan) made contributions under those arrangements; and

(c)

any person connected, at the time of the making of the loan or subsequently, with a person falling within paragraph (a) or (b) above.

(10)

In this section “the relevant scheme”, in relation to any personal pension arrangements, means the scheme in accordance with which those arrangements were made.

(11)

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

In section 650 of that Act (withdrawal of approval), the following subsection shall be inserted after subsection (5)—

“(6)

The power of the Board under this section to withdraw their approval in relation to any arrangements made under a personal pension scheme shall be exercisable for the purposes of section 650A notwithstanding that the time from which the approval is withdrawn is a time from which, by virtue of section 631(4) or 638A(4), the whole scheme ceases to be an approved scheme.”

After section 239A of the M64Taxation of Chargeable Gains Act 1992 there shall be inserted—

“ Personal pension schemes

239B Withdrawal of approval of approved arrangements.

(1)

This section applies where tax is charged in accordance with section 650A of the Taxes Act (tax charged on the withdrawal of the Board’s approval in relation to approved personal pension arrangements).

(2)

For the purposes of this Act the appropriate part of the assets which at the relevant time are held for the purposes of the relevant scheme—

(a)

shall be deemed to be acquired at that time for a consideration equal to the amount on which tax is charged by virtue of section 650A(2) of the Taxes Act; but

(b)

shall not be deemed to be disposed of by any person at that time.

(3)

The person who shall be deemed in accordance with subsection (2)(a) above to have acquired the appropriate part of the assets shall be the person who would be chargeable in respect of a chargeable gain accruing on a disposal of the assets at the relevant time.

(4)

In this section—

“the appropriate part” and “the relevant time” have the meanings given by subsection (3) of section 650A of the Taxes Act for the purposes of subsection (2) of that section; and

“the relevant scheme” has the same meaning as in that section.”

After section 651 of the Taxes Act 1988 there shall be inserted the following section—

“651A Information powers.

(1)

The Board may by regulations make any of the following provisions—

(a)

provision requiring prescribed persons to furnish to the Board, at prescribed times, information relating to any of the matters mentioned in subsection (2) below;

(b)

provision enabling the Board to serve a notice requiring prescribed persons to furnish to the Board, within a prescribed time, particulars relating to any of those matters;

(c)

provision enabling the Board to serve a notice requiring prescribed persons to produce to the Board, within a prescribed time, documents relating to any of those matters;

(d)

provision enabling the Board to serve a notice requiring prescribed persons to make available for inspection on behalf of the Board books, documents and other records, being books, documents and records which relate to any of those matters;

(e)

provision requiring prescribed persons to preserve for a prescribed time books, documents and other records, being books, documents and records which relate to any of those matters.

(2)

The matters referred to in subsection (1) above are—

(a)

any personal pension scheme which is or has been approved; and

(b)

any personal pension arrangements which are or have been approved.

(3)

A person who fails to comply with regulations made under subsection (1)(e) above shall be liable to a penalty not exceeding £3,000.

(4)

Regulations under this section may make different provision for different descriptions of case.

(5)

In this section “prescribed” means prescribed by regulations made under this section.”

After section 653 of the Taxes Act 1988 there shall be inserted the following section—

“653A Notices to be given to scheme administrator.

(1)

Where—

(a)

the Board, or any officer of the Board, is authorised or required by or in consequence of any provision of this Chapter to give a notice to the person who is the scheme administrator of a personal pension scheme, but

(b)

there is for the time being no scheme administrator for that scheme or the person who is the scheme administrator for that scheme cannot be traced,

that power or duty may be exercised or performed by giving that notice, instead, to the person specified in subsection (2) below.

(2)

That person is—

(a)

the person who established the scheme; or

(b)

any person by whom that person has been directly or indirectly succeeded in relation to the provision of benefits under the scheme.

(3)

The giving of a notice in accordance with this section shall have the same effect as the giving of that notice to the scheme administrator and, without prejudice to section 650A(5), shall not impose an additional obligation or liability on the person to whom the notice is actually given.”

Part XIV of the Taxes Act 1988 (pension schemes etc.) shall have effect, and shall be deemed always to have had effect, with the following section inserted as the first section of Chapter VI of that Part—

“658A Charges and assessments on administrators.

(1)

Tax charged under Chapter I or IV of this Part on the administrator of a scheme—

(a)

shall be treated as charged on every relevant person and be assessable by the Board in the name of the administrator of the scheme, but

(b)

shall not be assessable on any relevant person who, at the time of the assessment, is no longer either the administrator of the scheme or included in the persons who are the administrator of the scheme.

(2)

For the purposes of subsection (1) above a person is a relevant person in relation to any charge to tax on the administrator of a scheme if he is a person who at the time when the charge is treated as arising or any subsequent time is, or is included in the persons who are, the administrator of the scheme.

(3)

Where tax charged under Chapter I of this Part on the administrator of a scheme is assessable by virtue of section 606 or 606A on a person who is not a relevant person for the purposes of subsection (1) above, the assessment shall be made by the Board.

(4)

In this section “administrator”, in relation to a scheme, means the person who is—

(a)

the administrator of the scheme within the meaning given by section 611AA; or

(b)

the scheme administrator, as defined in section 630.

(5)

This section is without prejudice to section 591D(4).”

In section 9 of the M66Taxes Management Act 1970 (self-assessment), in subsection (1), for “subsection (2)" there shall be substituted “ subsections (1A) and (2) ”; and after that subsection there shall be inserted the following subsection—

“(1A)

The tax to be assessed on a person by a self-assessment shall not include any tax which, under Chapter I or IV of Part XIV of the principal Act, is charged on the administrator of a scheme (within the meaning of section 658A of that Act) and is assessable by the Board in accordance with that section.”

In Schedule 5AA to the Taxes Act 1988 (guaranteed returns on transactions in futures and options), the following paragraph shall be inserted after paragraph 4—

“ Futures running to delivery and options exercised

4A

(1)

This paragraph applies where for the purposes of this Schedule—

(a)

there are or, apart from section 144(2) or (3) of the 1992 Act, would be two or more related transactions;

(b)

one of those transactions is or would be the creation or acquisition (by the making or receiving of a grant or otherwise) of a future or option;

(c)

the other transaction, or one of the other transactions, is or would be the running of the future to delivery or the exercise of the option; and

(d)

the transaction mentioned in paragraph (c) above is not treated for those purposes as a disposal of a future or option.

(2)

This Schedule shall have effect in relation to the parties to the future or option as if the transaction specified in sub-paragraph (3) below—

(a)

were a transaction for which the scheme or arrangements by reference to which the transactions are related transactions provided; and

(b)

were a transaction which in fact takes place at the time (“the relevant time") immediately before the future runs to delivery or, as the case may be, the option is exercised.

(3)

That transaction is a disposal of the future or option which—

(a)

in the case of a person whose rights and entitlements under the future or option have a market value at the relevant time, consists in a disposal for a consideration equal to that market value; and

(b)

in the case of any other party to the future or option, consists in a disposal which—

(i)

is made for a nil consideration; and

(ii)

involves that person in incurring costs equal to the amount specified in sub-paragraph (4) below.

(4)

That amount is the amount which that party to the future or option might reasonably have been expected to pay, in a transaction at arm’s length entered into at the relevant time, for the release of his obligations and liabilities under the future or option.

(5)

Where, in a case in which a transaction is deemed to take place by virtue of sub-paragraph (2)(b) above (“the deemed transaction")—

(a)

any profits or gains arising from the deemed transaction are chargeable to tax under Case VI of Schedule D in accordance with paragraph 1(1) above, or

(b)

any loss arising in the deemed transaction is brought into account for the purposes of section 392 or 396 in accordance with paragraph 1(5) above,

amounts taken into account or allowable as deductions in computing those profits or gains, or that loss, shall not be excluded by virtue of section 37 or 39 of the 1992 Act (exclusion of amounts taken into account or allowable for the purposes of the taxation of income and profits) from any computation made for the purposes of that Act, but paragraph 1(6) above shall be given effect to in relation to the 1992 Act in accordance with sub-paragraphs (6) to (10) below.

(6)

Where there are profits or gains arising to any person (“the taxpayer") from the deemed transaction, an increase equal to the amount of those profits or gains shall be made in the amount that would otherwise be taken for the purposes of the 1992 Act to be—

(a)

the amount of the consideration for the acquisition of any asset acquired by the taxpayer by means of the future running to delivery or, as the case may be, by the exercise of the option; or

(b)

the amount of the consideration for the acquisition by him of any asset disposed of by him by means of the future running to delivery or, as the case may be, in consequence of the exercise of the option;

but any increase made by virtue of paragraph (b) above in the amount of any consideration shall be disregarded in computing the amount of any indexation allowance.

(7)

Where there is a loss for any person (“the taxpayer") in the deemed transaction—

(a)

a reduction equal to the smaller of the amount of the loss and the amount to be reduced shall be made in the amount that would otherwise be taken for the purposes of the 1992 Act to be the amount of the consideration mentioned in sub-paragraph (6)(a) or (b) above; and

(b)

the amount (if any) by which the amount of the loss exceeds the amount to be reduced shall be deemed to be a chargeable gain accruing to the taxpayer on the occasion specified in sub-paragraph (8) below.

(8)

That occasion is—

(a)

in a case where the consideration mentioned in paragraph (a) of sub-paragraph (6) above has been reduced to nil, the first occasion after the acquisition mentioned in that paragraph when there is a disposal of the asset in question; and

(b)

in a case where it is the consideration mentioned in sub-paragraph (6)(b) above that has been reduced to nil, the occasion of the disposal made by the taxpayer by means of the future running to delivery or, as the case may be, in consequence of the exercise of the option.

(9)

For the purposes of sub-paragraphs (6) and (7) above, where in any case there is a deemed disposal of an option by the person who granted it, any determination—

(a)

of the profits arising to the grantor of the option from that disposal, or

(b)

of the losses for the grantor in that disposal,

shall be made as if that disposal and the disposal by which the option was granted were a single transaction.

(10)

In sub-paragraph (8) above—

(a)

the reference in paragraph (a) to a disposal of the asset in question includes a reference to anything that would be such a disposal but for the provisions of section 116(10) or 127 of the 1992 Act; and

(b)

the references in each of paragraphs (a) and (b) to a disposal include references to a disposal which, in accordance with the 1992 Act, would (apart from sub-paragraph (7)(b) above) be a disposal on which neither a gain nor a loss accrues.

(11)

In this paragraph—

“future” and “option” have the same meanings as in paragraph 4 above;

“market value” has the same meaning as in the 1992 Act;

“party”, in relation to a future or option, means one of the persons who has any right or entitlement comprised in or arising under the future or option or who is subject to any obligation or liability so comprised or arising;

and references in this paragraph to a future running to delivery are references to the discharge by performance of the obligations owed under the commodity or financial futures contract in question to the party to the future whose rights are in relation to its underlying subject matter.

(12)

Sub-paragraph (3) of paragraph 3 above applies for the purposes of sub-paragraph (11) above as it applies for the purposes of that paragraph.”