Income and Corporation Taxes Act 1988

1988 CHAPTER 1

An Act to consolidate certain of the enactments relating to income tax and corporation tax, including certain enactments relating also to capital gains tax; and to repeal as obsolete section 339(1) of the Income and Corporation Taxes Act 1970 and paragraphs 3 and 4 of Schedule 11 to the Finance Act 1980.

[9th February 1988]

PART I THE CHARGE TO TAX

Income tax

1 The charge to income tax.

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1A Application of lower rate to income from savings and distributions.

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1B Rates of tax applicable to distribution income etc.

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2 Fractions of a pound, and yearly assessments.

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3 Certain income charged at basic rate.

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4 Construction of references in Income Tax Acts to deduction of tax.

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5 Date for payment.

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Corporation tax

6 The charge to corporation tax and exclusion of income tax and capital gains tax.

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

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

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

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

(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

7 Treatment of certain payments and repayment of income tax.

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8 General scheme of corporation tax.

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8A Resolutions to reduce corporation tax.

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9 Computation of income: application of income tax principles.

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

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

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

(5) Where . . . any enactment applies both to income tax and to corporation tax—

(a) it shall not be affected in its operation by the fact that they are distinct taxes but, so far as is consistent with the Corporation Tax Acts, shall apply in relation to income tax and corporation tax as if they were one tax, so that, in particular, a matter which in a case involving two individuals is relevant for both of them in relation to income tax shall in a like case involving an individual and a company be relevant for him in relation to that tax and for it in relation to corporation tax; and

(b) for that purpose references in any such enactment to a relief from or charge to income tax, or to a specified provision of the Income Tax Acts shall, in the absence of or subject to any express adaptation, be construed as being or including a reference to any corresponding relief from or charge to corporation tax, or to any corresponding provision of the Corporation Tax Acts.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 Time for payment of tax.

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11 Companies not resident in United Kingdom.

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

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

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

11AA Determination of profits attributable to permanent establishment

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12 Basis of, and periods for, assessment.

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

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

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

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

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

(5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7ZA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7B) . . .

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(7C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) Where it appears to the inspector that the beginning or end of any accounting period of a company is uncertain, he may make an assessment on the company for such period, not exceeding 12 months, as appears to him appropriate, and that period shall be treated for all purposes as an accounting period of the company unless either—

(a) the inspector on further facts coming to his knowledge sees fit to revise it; or

(b) on an appeal against the assessment in respect of some other matter the company shows the true accounting periods;

and if on an appeal against an assessment made by virtue of this subsection the company shows the true accounting periods, the assessment appealed against shall, as regards the period to which it relates, have effect as an assessment or assessments for the true accounting periods, and there may be made such other assessments for any such periods or any of them as might have been made at the time when the assessment appealed against was made.

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Small companies’ rate

13 Small companies’ relief.

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13ZA Interpretation of section 13(7)

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13AA Corporation tax starting rate.

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13AB The non-corporate distribution rate

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13A Close investment-holding companies.

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Advance corporation tax

14 Advance corporation tax and qualifying distributions.

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The six Schedules

15 Schedule A.

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16 Schedule B.

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17 Schedule C.

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18 Schedule D.

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19 Schedule E.

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20 Schedule F.

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PART II PROVISIONS RELATING TO THE SCHEDULE A CHARGE

General

21 Persons chargeable and basis of assessment.

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21A Computation of amount chargeable.

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21B Application of other rules applicable to Case I of Schedule D.

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21C The Schedule A charge and mutual business.

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22 Assessments.

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23 Collection from lessees and agents.

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24 Construction of Part II.

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Deductions and other allowances

25 Deductions from rent: general rules.

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26 Deductions from rent: land managed as one estate.

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27 Deductions from rent: maintenance funds for historic buildings.

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28 Deductions from receipts other than rent.

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29 Sporting rights.

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30 Expenditure on making sea walls.

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31 Provisions supplementary to sections 25 to 30.

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31ZA Deduction for expenditure on energy-saving items

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31ZB Restrictions on relief

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31ZC Regulations

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31A Deductions for expenditure by landlords on energy-saving items

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31B Provisions supplementary to section 31A

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32 Capital allowances for machinery and plant used in estate management.

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33 Agricultural land: allowance for excess expenditure on maintenance.

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Connected persons

33A Rents or receipts payable by a connected person.

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33B Rents or receipts relating to land in respect of which a connected person makes payments to a third party.

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Premiums, leases at undervalue etc

34 Treatment of premiums, etc. as rent.

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35 Charge on assignment of lease granted at an undervalue.

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36 Charge on sale of land with right to reconveyance.

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37 Premiums paid etc: deductions from premiums and rent received.

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37A Section 37(4) and reductions in receipts under ITTOIA 2005

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38 Rules for ascertaining duration of leases.

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39 Saving for pre-1963 leases, and special relief for individuals.

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Supplementary provisions

40 Tax treatment of receipts and outgoings on sale of land.

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41 Relief for rent etc. not paid.

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42 Appeals against determinations under . . . Chapter 4 of Part 3 of ITTOIA 2005 .

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42A Non-residents and their representatives.

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43 Non-residents.

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Rent factoring

43A Finance agreement: interpretation.

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43B Transfer of rent.

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43C Transfer of rent: exceptions, &c.

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43D Interposed lease.

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43E Interposed lease: exceptions, &c.

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43F Insurance business.

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43G Interpretation.

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PART III GOVERNMENT SECURITIES

General

44 Income tax: mode of charge.

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45 Interpretation of Part III.

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Government securities: exemptions from tax

46 Savings certificates and tax reserve certificates.

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47 United Kingdom government securities held by non-residents.

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48 Securities of foreign states.

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49 Stock and dividends in name of Treasury etc.

(1) No tax shall be chargeable in respect of the stock or dividends—

(a) transferred, in pursuance of any Act of Parliament, to accounts in the books of the Bank of England in the name of the Treasury or the National Debt Commissioners, or

(b) transferred, in pursuance of any Act of Parliament, to the Treasury or the National Debt Commissioners and in respect of which the Treasury or those Commissioners are entered as holder in the registers kept by the Registrar of Government Stock,

but the Bank of England and the Registrar of Government Stock shall each transmit to the Board an account of the total amount thereof in those books or registers as the case may be.

(2) No tax shall be chargeable in respect of the stock or dividends belonging to the Crown, in whatever name they may stand in the books of the Bank of England or in the registers kept by the Registrar of Government Stock .

(3) In this section “dividends” means any interest, public annuities, dividends or shares of annuities.

(4) In this section “ Registrar of Government Stock ” means the person or persons appointed in accordance with regulations under section 47(1)(b) of the Finance Act 1942(see regulation 3 of the Government Stock Regulations 2004).

Government securities: interest payable without deduction of tax

50 United Kingdom securities: Treasury directions for payment without deduction of tax.

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51 Treasury directions as respects Northern Ireland securities.

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51AA Commencement of direction under section 50 or 51.

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51A Gilt-edged securities held under authorised arrangements.

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51B Periodic accounting for tax on interest on gilt-edged securities.

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52 Taxation of interest on converted government securities and interest which becomes subject to deduction.

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PART IV PROVISIONS RELATING TO THE SCHEDULE D CHARGE

CHAPTER I SUPPLEMENTARY CHARGING PROVISIONS

53 Farming and other commercial occupation of land (except woodlands).

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54 Woodlands managed on a commercial basis.

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55 Mines, quarries and other concerns.

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56 Transactions in deposits with and without certificates or in debts.

(1) Subsection (2) below applies to the following rights—

(a) the right to receive the amount, with or without interest, stated in a certificate of deposit;

(b) the right to receive an amount payable with interest—

(i) in a transaction in which no certificate of deposit or security is issued, and

(ii) which is payable by a bank or similar institution or a person regularly engaging in similar transactions;

and the right to receive that interest.

(2) Profits or gains arising to a company from the disposal of a right to which this subsection applies or, except so far as it is a right to receive interest, from the exercise of any such right (whether by the person to whom the certificate was issued or by some other person, or, as the case may be, by the person who acquired the right in the transaction referred to in subsection (1) above or by some person acquiring it directly or indirectly from that person), shall, if not falling to be taken into account as a trading receipt, be treated as an amount to which the charge to corporation tax on income applies .

(3) Subsection (2) above and section 551 of ITTOIA 2005 (charge to income tax on profits from disposal of deposit rights) do not apply in the case of the disposal or exercise of a right to receive an amount stated in a certificate of deposit or interest on such an amount—

(a) if the company disposing of the right acquired it before 7th March 1973;

(b) to any profits or gains arising to a fund or scheme in the case of which provision is made by section 613(4) or 614(2) or (3) or section 186 of the Finance Act 2004 for exempting the whole or part of its income from income tax;

(3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(4A) This section and section 56A shall not apply for the purposes of corporation tax except in relation to rights in existence before 1st April 1996.

(4B) For the purposes of corporation tax, where any profits or gains arising from the disposal or exercise of a right in existence before 1st April 1996 are, or (if there were any) would be, chargeable under this section, nothing in Part 5 of CTA 2009 (loan relationships) shall require any amount relating to that disposal, or to the exercise of that right, to be brought into account for the purposes of that Part .

(5) In this section—

“ certificate of deposit ” means a document relating to money, in any currency, which has been deposited with the issuer or some other person, being a document which recognises an obligation to pay a stated amount to bearer or to order, with or without interest, and being a document by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable; and
“ security ” has the same meaning as in section 132 of the 1992 Act .

56A Disposal or exercise of rights in pursuance of deposits.

(1) This section applies where there is an arrangement under which—

(a) there is a right to receive an amount (with or without interest)

in pursuance of a deposit of money,

(b) when the right comes into existence there is no certificate of deposit in respect of the right, and

(c) the person for the time being entitled to the right is entitled to call for the issue of a certificate of deposit in respect of the right.

(2) In such a case—

(a) the right shall be treated as not falling within section 56(1)(b), and

(b) if there is a disposal or exercise of the right before such time (if any) as a certificate of deposit is issued in respect of it, section 56(2) shall apply to it by virtue of this paragraph.

(3) In the application of section 56 by virtue of this section—

(a) subsection (2) shall have effect as if the words from “(whether” to “person)” read “(whether by the person originally entitled to the right or by some other person)”, and

(b) subsection (3) shall have effect as if the words “stated in a certificate of deposit” read “under an arrangement”.

(4) In this section “ certificate of deposit ” has the meaning given by section 56(5).

57 Deep discount securities.

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58 Foreign pensions.

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59 Persons chargeable.

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

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

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

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

CHAPTER II INCOME TAX: BASIS OF ASSESSMENT ETC.

Cases I and II

60 Assessment on current year basis.

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61 Basis of assessment at commencement.

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62 Change of basis period.

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62A Conditions for such a change.

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63 Basis of assessment on discontinuance.

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63A Overlap profits and overlap losses.

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Cases III, IV and V

64 Case III assessments.

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65 Cases IV and V assessments: general.

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65A Case V income from land outside UK: income tax.

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66 Special rules for fresh income.

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67 Special rules where source of income disposed of or yield ceases.

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68 Special rules where property etc. situated in Republic of Ireland.

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68A Share incentive plans: application of section 68B

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68B Share incentive plans: cash dividends and dividend shares

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68C Share incentive plans: interpretation

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Case VI

69 Case VI assessments.

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CHAPTER III CORPORATION TAX: BASIS OF ASSESSMENT ETC

70 Basis of assessment etc.

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70A Case V income from land outside UK: corporation tax.

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CHAPTER IV PROVISIONS SUPPLEMENTARY TO CHAPTERS II AND III

71 Computation of income tax where no profits in year of assessment.

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72 Apportionments etc. for purposes of Cases I, II and VI.

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73 Single assessments for purposes of Cases III, IV and V.

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CHAPTER V COMPUTATIONAL PROVISIONS

Deductions

74 General rules as to deductions not allowable.

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75 Expenses of management: companies with investment business

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75A Accounting period to which expenses of management are referable

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75B Amounts reversing expenses of management deducted: charge to tax

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76 Expenses of insurance companies

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Payments for restrictive undertakings

76ZA Payments for restrictive undertakings

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Seconded employees

76ZB Employees seconded to charities and educational establishments

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Counselling and retraining expenses

76ZC Counselling and other outplacement services

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76ZD Retraining courses

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76ZE Retraining courses: recovery of tax

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Redundancy payments etc

76ZF Redundancy payments and approved contractual payments

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76ZG Payments in respect of employment wholly in employer's business

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76ZH Payments in respect of employment in more than one capacity

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76ZI Additional payments

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76ZJ Payments by the Government

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Contributions to local enterprise organisations or urban regeneration companies

76ZK Contributions to local enterprise organisations or urban regeneration companies

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Unpaid remuneration

76ZL Unpaid remuneration

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76ZM Unpaid remuneration: supplementary

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Car or motor cycle hire

76ZN Car or motor cycle hire

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76ZO Hiring cars (but not motor cycles) with low CO ₂ emissions before 1 April 2013

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76A Levies and repayments under the Financial Services and Markets Act 2000.

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76B Levies and repayments under the Financial Services and Markets Act 2000: investment companies.

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77 Incidental costs of obtaining loan finance.

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78 Discounted bills of exchange.

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79 Contributions to local enterprise agencies.

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79A Contributions to training and enterprise councils and local enterprise companies.

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79B Contributions to urban regeneration companies

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80 Expenses connected with foreign trades etc.

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81 Travel between trades etc.

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82 Interest paid to non-residents.

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82A Expenditure on research and development.

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82B Payments to research associations, universities etc.

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83 Patent fees etc. and expenses.

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83A Gifts in kind to charities etc.

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84 Gifts to educational establishments.

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86 Employees seconded to charities and educational establishments.

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86A Charitable donations: contributions to agent’s expenses.

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87 Taxable premiums etc.

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87A Section 87(2) and (3) and reductions in receipts under ITTOIA 2005

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88 Payments to Export Credit Guarantee Department.

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88A Debts of overseas governments etc.

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88B Section 88A debts: restriction on deductions under section 74(j).

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88C Section 88A debts: restriction on other deductions.

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88D Restriction of deductions in respect of certain debts

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89 Debts proving to be irrecoverable after discontinuance etc

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90 Additional payments to redundant employees.

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91 Cemeteries.

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91A Waste disposal: restoration payments.

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91B Waste disposal: preparation expenditure.

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91BA Waste disposal: entitlement of successor to allowances.

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91C Mineral exploration and access.

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Treatment of regional development and other grants and debts released etc.

92 Regional development grants.

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93 Other grants under Industrial Development Act 1982 etc.

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94 Debts deducted and subsequently released.

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95 Taxation of dealers in respect of distributions etc.

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95ZA Taxation of UK distributions received by insurance companies

(1) If the total amount of relevant distributions received by a company in an accounting period exceeds £50,000, those distributions are to be taken into account in calculating for corporation tax purposes the profits of the company in that period (and accordingly section 130(2) of CTA 2009 does not apply in relation to those distributions).

(2) A company (“company A”) receives a “relevant distribution” if—

(a) it receives a distribution made by a company . . . (“company B”),

(b) the value of the shares or stock in respect of which the distribution is made (“the holding”) is materially reduced by reason of the distribution,

(c) a profit on the sale of the holding (to anyone other than company B) would be taken into account in calculating company A's profits in respect of relevant insurance business, and

(d) either—

(i) the holding amounts to, or is an ingredient in a holding amounting to, 10% of all holdings of the same class in company B, or

(ii) the period between the acquisition by company A of the holding and that company first taking steps to dispose of the holding does not exceed 30 days.

(3) In this section “ relevant insurance business ” means any kind of insurance business other than business in relation to which section 111 of the Finance Act 2012 applies .

(4) Section 177(7) of TCGA 1992 (provision supplementing provision corresponding to subsection (2)(d)(i) above) applies for the purposes of subsection (2)(d)(i).

(5) Section 731(4) below (interpretation of “taking steps to dispose of securities”) applies for the purposes of subsection (2)(d)(ii) as if the reference to the securities were to the holding.

Special provisions

95A Creative artists: relief for fluctuating profits

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96 Farming and market gardening: relief for fluctuating profits.

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97 Treatment of farm animals etc.

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

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99 Dealers in land.

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CHAPTER VI DISCONTINUANCE . . .

Valuation of trading stock etc.

100 Valuation of trading stock at discontinuance of trade.

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101 Valuation of work in progress at discontinuance of profession or vocation.

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102 Provisions supplementary to sections 100 and 101.

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Case VI charges on receipts

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104 Conventional basis: general charge on receipts after discontinuance . . . .

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105 Allowable deductions.

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106 Application of charges where rights to payments transferred.

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Reliefs

107 Treatment of receipts as earned income.

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108 Election for carry-back.

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109 Charge under section 104: relief for individuals born before 6th April 1917.

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Relief for post-cessation expenditure

109A Relief for post-cessation expenditure.

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Supplemental

110 Interpretation etc.

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Change of residence

110A Change of residence.

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CHAPTER VII PARTNERSHIPS AND SUCCESSIONS

General

111 Treatment of partnerships.

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

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

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

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

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

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

112 Partnerships controlled abroad.

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113 Effect, for income tax, of change in ownership of trade, profession or vocation.

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Partnerships involving companies

114 Special rules for computing profits and losses.

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115 Provisions supplementary to section 114.

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116 Arrangements for transferring relief.

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Limited partners

117 Restriction on relief: individuals.

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118 Restriction on relief: companies.

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Limited liability partnerships

118ZA Treatment of limited liability partnerships.

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118ZB Restriction on relief: companies

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118ZC Member’s contribution to trade.

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118ZD Carry forward of unrelieved losses.

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Non-active general partners and non-active members of limited liability partnerships

118ZE Restriction on relief for non-active partners

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118ZF Meaning of “the aggregate amount”

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118ZG “The individual’s contribution to the trade”

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118ZH “A significant amount of time”

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118ZI Carry forward of unrelieved losses of non-active partners

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18ZJ Commencement: the first restricted year

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118ZK Transitional provision for years after the first restricted year

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Partnerships exploiting films

118ZL Partnerships exploiting films

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118ZM Partnerships exploiting films: supplementary

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Partners: meaning of “contribution to the trade”

118ZN Partners: meaning of “contribution to the trade”

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118ZO Meaning of “relevant loss” in section 118ZN

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Chapter VIIA Paying and collecting agents

118A Definitions.

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118B Paying agents.

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118C Collecting agents.

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118D Chargeable payments and chargeable receipts.

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118E Deduction of tax from chargeable payments and chargeable receipts.

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118F Accounting for tax on chargeable payments and chargeable receipts.

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118G Relevant securities of eligible persons.

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118H Relevant securities of eligible persons: administration.

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118I Deduction of tax at reduced rate.

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118J Prevention of double accounting.

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118K Regulations.

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CHAPTER VIII MISCELLANEOUS AND SUPPLEMENTAL

119 Rent etc. payable in connection with mines, quarries and similar concerns.

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120 Rent etc. payable in respect of electric line wayleaves.

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121 Management expenses of owner of mineral rights.

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122 Relief in respect of mineral royalties.

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123 Foreign dividends.

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124 Interest on quoted Eurobonds.

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125 Annual payments for dividends or non-taxable consideration

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126 Treasury securities issued at a discount.

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126A Charge to tax on appropriation of securities and bonds.

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127 Enterprise allowance.

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127A Futures and options: transactions with guaranteed returns.

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128 Commodity and financial futures etc.: losses and gains.

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

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

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

129 Stock lending.

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129A Stock lending: interest on cash collateral.

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129B Stock lending fees.

(1) The income which, as income deriving from investments of a description specified in any of the relevant provisions, is eligible for relief from tax by virtue of that provision shall be taken to include any relevant stock lending fee.

(2) For the purposes of this section the relevant provisions are sections 613(4) and 614(3) and section 186 of the Finance Act 2004 .

(3) In this section “ relevant stock lending fee ”, in relation to investments of any description, means any amount, in the nature of a fee, which is payable in connection with any stock lending arrangement relating to investments which, but for any transfer under the arrangement, would be investments of that description.

(4) In this section “ stock lending arrangement ” has the same meaning as in section 263B of the 1992 Act.

130 Meaning of “investment company” in Part 4

In this Part of this Act —

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“ investment company ”, means any company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom, but includes any savings bank or other bank for savings except any which, for the purposes of the Trustee Savings Bank Act 1985, is a successor or a further successor to a trustee savings bank.

PART V PROVISIONS RELATING TO THE SCHEDULE E CHARGE

CHAPTER I SUPPLEMENTARY CHARGING PROVISIONS OF GENERAL APPLICATION

Miscellaneous provisions

131 Chargeable emoluments.

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132 Place of performance, and meaning of emoluments received in the U.K.

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133 Voluntary pensions.

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134 Workers supplied by agencies.

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Shareholdings, loans etc.

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136 Provisions supplementary to section 135.

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137 Payment of tax under section 135 by instalments.

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138 Share acquisitions by directors and employees.

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139 Provisions supplementary to section 138.

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140 Further interpretation of sections 135 to 139.

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140A Conditional acquisition of shares.

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140B Consideration for shares conditionally acquired.

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

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140D Convertible shares.

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140E Consideration for convertible shares.

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140F Supplemental provision with respect to convertible shares.

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

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140H Construction of sections 140A to 140G.

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Vouchers etc.

141 Non-cash vouchers.

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142 Credit-tokens.

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143 Cash vouchers taxable under P.A.Y.E.

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144 Supplementary provisions.

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144A Payments etc. received free of tax.

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Living accommodation

145 Living accommodation provided for employee.

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146 Additional charge in respect of certain living accommodation.

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146A Priority of rules applying to living accommodation.

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147 Occupation of Chevening House.

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Payments on retirement, sick pay etc.

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

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149 Sick pay.

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150 Job release scheme allowances, maternity pay and statutory sick pay.

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151 Income support etc.

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151A Jobseeker’s allowance.

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152 Notification of taxable amount of certain benefits .

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CHAPTER II EMPLOYEES EARNING £8,500 OR MORE AND DIRECTORS

Expenses

153 Payments in respect of expenses.

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Benefits in kind

154 General charging provision.

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155 Exceptions from the general charge.

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155ZA Accommodation, supplies or services used in performing duties of employment.

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155ZB Power to provide for exemption of minor benefits.

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155AA Mobile telephones.

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155A Care for children.

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156 Cash equivalent of benefits charged under section 154.

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156A Limited exemption for computer equipment.

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157 Cars available for private use.

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157A Cars available for private use: cash alternative, etc.

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158 Car fuel.

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159 Pooled cars.

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159AA Vans available for private use.

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159AB Pooled vans.

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159AC Heavier commercial vehicles available for private use.

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159A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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160 Beneficial loan arrangements.

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161 Exceptions from section 160.

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161A Treatment of qualifying loans.

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161B Beneficial loans: loans on ordinary commercial terms.

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162 Employee shareholdings.

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163 Expenses connected with living accommodation.

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164 Director’s tax paid by employer.

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165 Scholarships.

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General supplementary provisions

166 Notice of nil liability under this Chapter.

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167 Employment to which this Chapter applies.

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168 Other interpretative provisions.

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168A Price of a car as regards a year.

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168AA Equipment to enable disabled person to use car.

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

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168B Price of a car: accessories not included in list price.

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168C Price of a car: accessories available after car first made available.

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168D Price of a car: capital contributions.

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168E Price of a car: replacement accessories.

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168F Price of a car: classic cars.

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168G Price of a car: cap for expensive car.

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Preliminary

169 Interpretation.

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The relief

171 Relief from tax.

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172 Exceptions from tax.

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Registration

173 Persons who may apply for registration.

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174 Excluded employments.

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175 Applications for registration.

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176 Registration.

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177 Change of scheme employer.

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177A Death of scheme employer.

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177B Alteration of scheme’s terms.

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178 Cancellation of registration.

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Administration

179 Recovery of tax from scheme employer.

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180 Annual returns etc.

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181 Other information.

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182 Appeals.

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Supplementary

183 Partnerships.

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184 Independent accountants.

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CHAPTER IV OTHER EXEMPTIONS AND RELIEFS

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(1) The provisions of this section apply where, after 5th April 1979 and before 1st January 2003 , the trustees of an approved profit sharing scheme appropriate shares—

(a) which have previously been acquired by the trustees, and

(b) as to which the conditions in Part II of Schedule 9 are fulfilled,

to an individual who participates in the scheme (“the participant”).

(2) Notwithstanding that, by virtue of such an appropriation of shares as is mentioned in subsection (1) above, the beneficial interest in the shares passes to the participant to whom they are appropriated—

(a) the value of the shares at the time of the appropriation shall be treated as not being income of his chargeable to tax under Schedule E; and

(b) he shall not be chargeable to income tax under that Schedule by virtue of section 78 or 79 of the Finance Act 1988 in respect of the shares or by virtue of section 162 in any case where the shares are appropriated to him at an undervalue within the meaning of that section.

(3) Subject to the provisions of this section and paragraph 4 of Schedule 10, if, in respect of or by reference to any of a participant’s shares, the trustees become or the participant becomes entitled, before the release date, to receive any money or money’s worth (“a capital receipt”), . . . the appropriate percentage (determined as at the time the trustees become or the participant becomes so entitled) of so much of the amount or value of the receipt as exceeds the appropriate allowance for that year, as determined under subsection (12) below counts as employment income of the participant for the year of assessment in which the entitlement arises .

(4) If the trustees dispose of any of a participant’s shares at any time before the release date or, if it is earlier, the date of the participant’s death, then, subject to subsections (6) and (7) below, . . . the appropriate percentage of the locked-in value of the shares at the time of the disposal counts as employment income of the participant for the year of assessment in which the disposal takes place .

(5) Subject to paragraphs 5 and 6(6) of Schedule 10, the locked-in value of a participant’s shares at any time is—

(a) if prior to that time he has become entitled to a capital receipt (within the meaning of subsection (3) above) which is referable to those shares and—

(i) an amount calculated by reference to that capital receipt counts as his employment income by virtue of subsection (3) above, or

(ii) if the entitlement to the capital receipt arose before 6th April 2003, he was chargeable to income tax by virtue of that subsection (as it had effect before that date) in respect of that capital receipt,

the amount by which their initial market value exceeds the amount or value of that capital receipt or, if there has been more than one such receipt, the aggregate of them; and

(b) in any other case, their initial market value.

(6) Subject to subsection (7) below, if, on a disposal of shares falling within subsection (4) above, the proceeds of the disposal are less than the locked-in value of the shares at the time of the disposal, subsection (4) above shall have effect as if that locked-in value were reduced to an amount equal to the proceeds of the disposal.

(7) If, at any time prior to the disposal of any of a participant’s shares, a payment was made to the trustees to enable them to exercise rights arising under a rights issue, then, subject to subsection (8) below, subsections (4) and (6) above shall have effect as if the proceeds of the disposal were reduced by an amount equal to that proportion of that payment or, if there was more than one, of the aggregate of those payments which, immediately before the disposal, the market value of the shares disposed of bore to the market value of all the participant’s shares held by the trustees at that time.

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

(a) no account shall be taken of any payment to the trustees if or to the extent that it consists of the proceeds of a disposal of rights arising under a rights issue; and

(b) in relation to a particular disposal the amount of the payment or, as the case may be, of the aggregate of the payments referred to in that subsection shall be taken to be reduced by an amount equal to the total of the reduction (if any) previously made under that subsection in relation to earlier disposals;

and any reference in subsection (7) or paragraph (a) above to the rights arising under a rights issue is a reference to rights conferred in respect of a participant’s shares, being rights to be allotted, on payment, other shares or securities or rights of any description in the same company.

(9) If at any time the participant’s beneficial interest in any of his shares is disposed of, the shares in question shall be treated for the purposes of the relevant provisions as having been disposed of at that time by the trustees for (subject to subsection (10) below) the like consideration as was obtained for the disposal of the beneficial interest; and for the purposes of this subsection there is no disposal of the participant’s beneficial interest if and at the time when—

(a) in England and Wales or Northern Ireland, that interest becomes vested in any person on the insolvency of the participant or otherwise by operation of law, or

(b) in Scotland, that interest becomes vested in a judicial factor, in a trustee on the participant’s sequestrated estate or in a trustee for the benefit of the participant’s creditors.

(10) If—

(a) a disposal of shares falling within subsection (4) above is a transfer to which paragraph 2(2)(c) of Schedule 9 applies, or

(b) any other disposal falling within that subsection is not at arm’s length,

(c) a disposal of shares falling within that subsection is one which is treated as taking place by virtue of subsection (9) above and takes place within the period of retention,

then for the purposes of the relevant provisions the proceeds of the disposal shall be taken to be equal to the market value of the shares at the time of the disposal.

(11) Where the trustees of an approved scheme acquire any shares as to which the requirements of Part II of Schedule 9 are fulfilled and, within the period of 18 months beginning with the date of their acquisition, those shares are appropriated in accordance with the scheme, section 686 shall not apply to income consisting of dividends on those shares received by the trustees; and, for the purpose of determining whether any shares are appropriated within that period, shares which were acquired at an earlier time shall be taken to be appropriated before shares of the same class which were acquired at a later time.

(12) For the purposes of subsection (3) above, “ the appropriate allowance ”, in relation to any year of assessment, means a sum which, subject to a maximum of £60 , is the product of multiplying £20 by 1 plus the number of years which fall within the period of three years immediately preceding the year in question and in which shares were appropriated to the participant under the scheme; and if in any year (and before the release date) the trustees become or the participant becomes entitled, in respect of or by reference to any of his shares, to more than one capital receipt, the receipts shall be set against the appropriate allowance for that year in the order in which they are received.

(13) Schedule 10 shall have effect with respect to profit sharing schemes.

187 Interpretation of sections 185 and 186 and Schedules 9 and 10.

(1) In sections 185 and 186, this section and Schedules 9 and 10 “ the relevant provisions ” means those sections (including this section) and Schedules.

(2) For the purposes of the relevant provisions, except where the context otherwise requires—

“ appropriate percentage ” shall be construed in accordance with paragraph 3 of Schedule 10;
“ approved ”, in relation to a scheme, means approved under Schedule 9;
“ associated company ” has the same meaning as in section 416, except that, for the purposes of paragraph 23 of Schedule 9, subsection (1) of that section shall have effect with the omission of the words “ or at any time within one year previously ” ;
“ bonus date ” has the meaning given by paragraph 17 of Schedule 9;
“ capital receipt ” means money or money’s worth to which the trustees of or a participant in a profit sharing scheme become or becomes entitled as mentioned in section 186(3), but subject to paragraph 4 of Schedule 10;
“ certified contractual savings scheme ” has the meaning given by section 326;
“ control ” has the same meaning as in section 840;
“ grantor ”, in relation to any scheme, means the company which has established the scheme;
“ group scheme ” and, in relation to such a scheme, “ participating company ” have the meanings given by paragraph 1(3) and (4) of Schedule 9;
“ initial market value ”, in relation to shares in a profit sharing scheme, has the meaning given by paragraph 30(4) of Schedule 9;
“ locked-in value ”, in relation to any shares, shall be construed in accordance with section 186(5);
“ market value ” has the same meaning as in Part VIII of the 1992 Act ;
“ new holding ” has the meaning given by section 126(1)(b) of the 1992 Act ;
“ participant ”, in relation to a profit sharing scheme, means an individual to whom the trustees of the scheme have appropriated shares;
“ participant’s shares ”, in relation to a participant in a profit sharing scheme, means, subject to paragraph 5(4) of Schedule 10, shares which have been appropriated to the participant by the trustees;
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“ period of retention ” has the meaning given by paragraph 2 of Schedule 10;
“ release date ”, in relation to any of the shares of a participant in a profit sharing scheme, means the third anniversary of the date on which they were appropriated to him;
“ relevant amount ”, in relation to a participant in a profit sharing scheme, means an amount which is not less than £3,000 and not more than £8,000 but which, subject to that, is 10 per cent. of his salary (determined under subsection (5) below) for the year of assessment in question or the preceding year of assessment, whichever is the greater;
“ relevant requirements ” has the meaning given by paragraph 1 of Schedule 9;
“ savings-related share option scheme ” has the meaning given by paragraph 1 of Schedule 9;
“ scheme ” means a savings-related share option scheme, a share option scheme which is not a savings-related share option scheme or a profit sharing scheme, as the context may require;
“ shares ” includes stock;
“ specified age ”, in relation to a scheme, means the age specified in pursuance of paragraph 8A of Schedule 9 as the specified age for the purposes of the scheme;
“ the trustees ”, in relation to an approved profit sharing scheme or the shares of a participant in such a scheme, means the body of persons for the establishment of which the scheme must provide as mentioned in paragraph 30 of Schedule 9; and
“ just instrument ”, in relation to an approved profit sharing scheme, means the instrument referred to in paragraph 30(1)(c) of Schedule 9.

(3) For the purposes of the application of the relevant provisions in relation to any share option scheme or profit sharing scheme, a person has a material interest in a company if he, either on his own or with one or more associates, or if any associate of his with or without such other associates,—

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

(b) where the company is a close company, possesses, or is entitled to acquire, such rights as would, in the event of the winding-up of the company or in any other circumstances, give an entitlement to receive more than 25 per cent., or in the case of a share option scheme which is not a savings-related share option scheme more than 10 per cent., of the assets which would then be available for distribution among the participators.

In this subsection “ associate ” has the meaning given by section 417(3) and (4) and “ participator ” has the meaning given by section 417(1) .

(4) Subsection (3) above shall have effect subject to the provisions of Part VI of Schedule 9.

(5) For the purposes of subsection (2) above, a participant’s salary for a year of assessment means such of the emoluments of the office or employment by virtue of which he is entitled to participate in a profit sharing scheme as are liable to be paid in that year under deduction of tax pursuant to section 203 after deducting therefrom amounts included by virtue of Chapter II of this Part.

(6) Section 839 shall apply for the purposes of the relevant provisions.

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

(8) Where the disposal referred to in section 186(4) is made from a holding of shares which were appropriated to the participant at different times, then, in determining for the purposes of the relevant provisions—

(a) the initial market value and the locked-in value of each of those shares, . . .

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

(9) Any of the relevant provisions with respect to—

(a) the order in which any of a participant’s shares are to be treated as disposed of for the purposes of those provisions, or

(b) the shares in relation to which an event is to be treated as occurring for any such purpose,

shall have effect in relation to a profit sharing scheme notwithstanding any direction given to the trustees with respect to shares of a particular description or to shares appropriated to the participant at a particular time.

(10) In the relevant provisions “ workers’ cooperative ” means a registered society , as defined in section 1119 of CTA 2010 , which is a cooperative society and the rules of which include provisions which secure—

(a) that the only persons who may be members of it are those who are employed by, or by a subsidiary of, the society and those who are the trustees of its profit sharing scheme; and

(b) that, subject to any provision about qualifications for membership which is from time to time made by the members of the society by reference to age, length of service or other factors of any description, all such persons may be members of the society;

and in this subsection “ cooperative society ” has the same meaning as in section 2 of the Co-operative and Community Benefit Societies Act 2014 or, as the case may be, section 1 of the Industrial and Provident Societies Act (Northern Ireland) 1969.

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Retirement benefits etc.

188 Exemptions from section 148.

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189 Lump sum benefits on retirement.

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190 Payments to MPs and others.

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191 Job release scheme allowances not to be treated as income.

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Removal expenses and benefits

191A Removal expenses and benefits.

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191B Removal benefits: beneficial loan arrangements.

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Foreign emoluments and earnings, pensions and certain travel facilities

192 Relief from tax for foreign emoluments.

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192A Foreign earnings deduction for seafarers.

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193 Foreign earnings and travel expenses.

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194 Other foreign travel expenses.

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195 Travel expenses of employees not domiciled in the United Kingdom.

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196 Foreign pensions.

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197 Leave travel facilities for the armed forces.

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197A Car parking facilities

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197AA Works bus services.

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197AB Support for public transport road services.

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197AC Provision of cycle or cyclist’s safety equipment.

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Mileage allowances

197AD Mileage allowance payments

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197AE Passenger payments

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197AF Mileage allowance relief

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197AG Giving effect to mileage allowance relief

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197AH Interpretation of sections 197AD to 197AG

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Mileage allowances

197B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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197C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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197D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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197E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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197F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Sporting and recreational facilities

197G Sporting and recreational facilities.

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Other expenses, subscriptions etc.

198 Relief for necessary expenses.

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198A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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199 Expenses necessarily incurred and defrayed from official emoluments.

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200 Expenses of Members of Parliament.

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200ZA Expenses of members of Scottish Parliament, National Assembly for Wales or Northern Ireland Assembly.

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200AA Incidental benefits for holders of certain offices etc.

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200A Incidental overnight expenses.

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200C Expenditure excluded from section 200B.

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200E Education and training funded by employers.

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200G Section 200E: exclusion of expenditure if contributions not generally available to staff.

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200H Section 200E: exclusion of expenditure otherwise relieved.

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200J Education or training funded by third parties.

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201 Fees and subscriptions to professional bodies, learned societies etc.

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201AA Employee liabilities and indemnity insurance.

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201A Expense of entertainers.

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202 Donations to charity: payroll deduction scheme.

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CHAPTER V ASSESSMENT, COLLECTION, RECOVERY AND APPEALS

202A Assessment on receipts basis.

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202B Receipts basis: meaning of receipt.

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203 Pay as you earn.

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203A P.A.Y.E.: meaning of payment.

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203B PAYE: payment by intermediary.

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203C PAYE: employee of non-UK employer.

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203D PAYE: employee non-resident, etc.

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203E PAYE: mobile UK workforce.

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203F PAYE: tradeable assets.

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203FA PAYE: enhancing the value of an asset.

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203G PAYE: non-cash vouchers.

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203H PAYE: credit-tokens.

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203I PAYE: cash vouchers.

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203J S.203B to s.203I: accounting for tax.

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203K Trading arrangements.

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203L S.203B to s.203K: interpretation, etc.

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204 P.A.Y.E repayments.

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205 Assessments unnecessary in certain circumstances.

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206 Additional provision for certain assessments.

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206A PAYE settlement agreements.

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207 Disputes as to domicile or ordinary residence.

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PART VI COMPANY DISTRIBUTIONS, TAX CREDITS ETC

CHAPTER I TAXATION OF COMPANY DISTRIBUTIONS

207A Application of lower rate to company distributions.

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208 U.K. company distributions not generally chargeable to corporation tax.

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CHAPTER II MATTERS WHICH ARE DISTRIBUTIONS FOR THE PURPOSES OF THE CORPORATION TAX ACTS

209 Meaning of “distribution”.

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209A Section 209(3AA): link to shares of company or associated company

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209B Section 209(3AA): hedging arrangements

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CHAPTER III MATTERS WHICH ARE NOT DISTRIBUTIONS FOR THE PURPOSES OF THE CORPORATION TAX ACTS

Payments of interest

212 Interest etc. paid in respect of certain securities.

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Demergers

213 Exempt distributions.

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213A Exempt distributions: division of business

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214 Chargeable payments connected with exempt distributions.

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215 Advance clearance by Board of distributions and payments.

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216 Returns.

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217 Information.

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218 Interpretation of sections 213 to 217.

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Purchase of own shares

219 Purchase by unquoted trading company of own shares.

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220 Conditions as to residence and period of ownership.

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221 Reduction of vendor’s interest as shareholder.

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222 Conditions applicable where purchasing company is member of group.

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223 Other conditions.

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224 Relaxation of conditions in certain cases.

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225 Advance clearance of payments by Board.

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226 Returns and information.

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227 Associated persons.

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228 Connected persons.

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229 Other interpretative provisions.

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Stock dividends

230 Stock dividends: distributions.

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Industrial and provident society dividends etc

230A Dividend or bonus granted by industrial and provident society

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CHAPTER IV TAX CREDITS

231 Tax credits for certain recipients of qualifying distributions.

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231A Restrictions on the use of tax credits by pension funds.

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231AA No tax credit for borrower under stock lending arrangement or interim holder under repurchase agreement.

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231AB No tax credit for original owner under repurchase agreement in respect of certain manufactured dividends.

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231B Consequences of certain arrangements to pass on the value of a tax credit.

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232 Tax credits for non-U.K. residents.

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233 Taxation of certain recipients of distributions and in respect of non-qualifying distributions.

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234 Information relating to distributions.

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234A Information relating to distributions: further provisions.

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235 Distributions of exempt funds etc.

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236 Provisions supplementary to section 235.

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237 Disallowance of reliefs in respect of bonus issues.

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CHAPTER V ADVANCE CORPORATION TAX AND FRANKED INVESTMENT INCOME

238 Interpretation of terms and collection of ACT.

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239 Set-off of ACT against liability to corporation tax.

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240 Set-off of company’s surplus ACT against subsidiary’s liability to corporation tax.

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241 Calculation of ACT where company receives franked investment income.

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242 Set-off of losses etc. against surplus of franked investment income.

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243 Set-off of loss brought forward, or terminal loss.

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244 Further provisions relating to claims under section 242 or 243.

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245 Calculation etc. of ACT on change of ownership of company.

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245A Restriction on application of section 240 in certain circumstances.

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245B Restriction on set-off where asset transferred after change in ownership of company.

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246 Charge of ACT at previous rate until new rate fixed, and changes of rate.

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Chapter VA Foreign Income Dividends

Election by company paying dividend

246A Election by company paying dividend.

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246B Procedure for making election.

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Recipient of foreign income dividend

246C No tax credit for recipient.

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246D Individuals etc.

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Companies: payments and receipts

246E Foreign income dividend not franked payment.

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246F Calculation of ACT where company receives foreign income dividend.

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246G Information relating to foreign income dividends.

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246H Power of inspector to require information.

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Foreign source profit and distributable foreign profit

246I Foreign source profit and distributable foreign profit.

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Matching of dividend with distributable foreign profit

246J Matching of dividend with distributable foreign profit.

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246K Matching: subsidiaries.

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246L Requirement as to subsidiaries.

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246M Matching: further provisions.

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Repayment or set-off of advance corporation tax

246N ACT to be repaid or set off against corporation tax liability.

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246P Notional foreign source advance corporation tax.

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246Q Repayment or set-off: supplementary.

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246R Supplementary claims.

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International headquarters companies

246S International headquarters companies.

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246T Liability to pay ACT displaced.

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246U Settlement of liability by IHC as to ACT.

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246V Settlement of liability by non-IHC as to ACT.

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246W Payments and repayments where further matching takes place.

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Adjustments

246X Adjustments where profits or foreign tax altered.

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Application of this Chapter

246Y Application of this Chapter.

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CHAPTER VI MISCELLANEOUS AND SUPPLEMENTAL

Group income

247 Dividends etc. paid by one member of a group to another.

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248 Provisions supplementary to section 247.

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Stock dividends

249 Stock dividends treated as income.

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250 Returns.

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251 Interpretation of sections 249 and 250.

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251A Application of sections 251B and 251C

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251B Treatment of cash dividend retained and then later paid out

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251C Charge on dividend shares ceasing to be subject to plan

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251D Interpretation of sections 251A to 251C

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Supplemental

252 Rectification of excessive set-off etc. of ACT or tax credit.

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253 Power to modify or replace section 234(5) to (9) and Schedule 13.

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254 Interpretation of Part VI.

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255 “Gross rate” and “gross amount” of distributions to include ACT.

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PART VII GENERAL PROVISIONS RELATING TO TAXATION OF INCOME OF INDIVIDUALS

CHAPTER I PERSONAL RELIEFS

The reliefs

256 General.

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256A Meaning of “adjusted net income”

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256B Meaning of “the minimum amount”

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257 Personal allowance.

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257AA Children’s tax credit.

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257A Married couple’s allowance (pre-5th December 2005 marriages) .

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257AB Married couple's allowance (post-5th December 2005 marriages and civil partnerships etc.)

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257BA Elections as to transfer of relief under section 257A or 257AB .

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257BB Transfer of relief under section 257A where relief exceeds income or 257AB.

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257B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

257C Indexation of amounts in sections 256B, 257 , 257A and 257AB .

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257D Transitional relief: husband with excess allowances.

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257E Transitional relief: the elderly.

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257F Transitional relief: separated couples.

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258 Widower’s or widow’s housekeeper.

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259 Additional relief in respect of children.

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260 Apportionment of relief under section 259.

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261 Claims under section 259 for year of marriage.

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261A Additional relief in respect of children for year of separation.

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262 Widow’s bereavement allowance.

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263 Dependent relatives.

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264 Claimant depending on services of a son or daughter.

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265 Blind person’s allowance.

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266 Life assurance premiums.

(1) Subject to the provisions of this section, section 274 and Schedules 14 and 15 and sections 192 to 194 of the Finance Act 2004, an eligible individual who pays any such premium as is specified in subsection (2) below . . . shall (without making any claim) be entitled to relief under this section.

(1A) For the purposes of subsection (1) above an individual is an eligible individual if the individual—

(a) is resident in the United Kingdom, or

(b) meets the conditions in section 56(3) of ITA 2007.

(2) The premiums referred to in subsection (1) above are any premiums paid by an individual under a policy of insurance or contract for a deferred annuity, where—

(a) the payments are made to —

(i) a person who has permission under Part 4A of the Financial Services and Markets Act 2000 or under paragraph 15 of Schedule 3 to that Act (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule) to effect or carry out contracts of long-term insurance; or

(ii) a member of the Society who effects or carries out contracts of long-term insurance in accordance with Part 19 of the Financial Services and Markets Act 2000;

(iv) in the case of a deferred annuity, the National Debt Commissioners; and

(b) the insurance or, as the case may be, the deferred annuity is on the life of the individual or on the life of his spouse or civil partner ; and

(3) Subject to subsections . . . (10) and (11) below, no relief under this section shall be given—

(a) except in respect of premiums payable under policies for securing a capital sum on death, whether in conjunction with any other benefit or not;

(b) in respect of premiums payable under any policy issued in respect of an insurance made after 19th March 1968 unless the policy is a qualifying policy;

(d) in respect of premiums payable during the period of deferment in respect of a policy of deferred assurance.

(4) Subject to subsection (8) below, relief under this section in respect of any premiums paid by an individual in a year of assessment shall be given by making good to the person to whom they are paid any deficiency arising from the deductions authorised under subsection (5) below; and this section and Schedule 14 shall have effect in relation to any premium or part of a premium which is paid otherwise than in the year of assessment in which it becomes due and payable as if it were paid in that year.

(5) Subject to the provisions of Schedule 14—

(a) an individual resident in the United Kingdom who is entitled to relief under this section in respect of any premium may deduct from any payment in respect of the premium and retain an amount equal to 12.5 per cent of the payment; and

(b) the person to whom the payment is made shall accept the amount paid after the deduction in discharge of the individual’s liability to the same extent as if the deduction had not been made and may recover the deficiency from the Board.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) Where the individual is not resident in the United Kingdom (but is entitled to relief by virtue of subsection (1A)(b)) , subsection (4) above shall not apply but . . . the like relief shall be given to him under paragraph 6 of Schedule 14.

(9) Subsections (5) and (8) above shall apply in relation to an individual who is not resident in the United Kingdom but is a member of the armed forces of the Crown or the spouse or civil partner of such a member as if the individual were so resident.

(10) Subsection (3)(b) above shall not apply—

(a) to any policy of life insurance having as its sole object the provision on an individual’s death or disability of a sum substantially the same as any amount then outstanding under a mortgage of his residence, or of any premises occupied by him for the purposes of a business, being a mortgage the principal amount secured by which is repayable by instalments payable annually or at shorter regular intervals; or

(b) to any policy of life insurance issued in connection with an approved scheme as defined in Chapter I of Part XIV.

In the application of this subsection to Scotland, for any reference to a mortgage there shall be substituted a reference to a heritable security within the meaning of the Conveyancing (Scotland) Act 1924 (but including a security constituted by ex facie absolute disposition or assignation).

(11) Subsection (3)(a) and (d) above shall not affect premiums payable—

(a) under policies or contracts made in connection with any superannuation or bona fide pension scheme for the benefit of the employees of any employer, or of persons engaged in any particular trade, profession, vocation or business, or for the benefit of the spouse, civil partner, widow, widower , surviving civil partner or children or other dependants of any such employee or person, or

(b) under policies taken out by teachers in the schools known in the year 1918 as secondary schools, pending the establishment of a superannuation or pension scheme for those teachers.

(12) Schedule 14 shall have effect for the purpose of modifying, for certain cases, and supplementing the provisions of this section.

(13) In . . . Schedule 14, “ friendly society ” means the same as in the Friendly Societies Act 1992 (and includes any society that by virtue of section 96(2) of that Act is to be treated as a registered friendly society within the meaning of that Act).

(14) In subsection (2)(a)—

“contracts of long-term insurance” means contracts which fall within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; and
“member of the society” has the same meaning as in Lloyd’s Act 1982 .

266A Life assurance premiums paid by employer

(1) This section applies if—

(a) pursuant to an employer-financed retirement benefits scheme, the employer in any year of assessment pays a sum with a view to the provision of any relevant benefits for or in respect of any employee of that employer, and

(b) the payment is made under such an insurance or contract as is mentioned in section 266.

This section applies whether or not the accrual of the relevant benefits is dependent on any contingency.

(2) Relief, if not otherwise allowable, shall be given to that employee under section 266 in respect of the payment to the extent, if any, to which such relief would have been allowable to him if—

(a) the payment had been made by him, and

(b) the insurance or contract under which the payment is made had been made with him.

(3) For the purposes of subsection (1)(a) benefits are provided in respect of an employee if they are provided for the employee’s spouse, widow or widower, children, dependants or personal representatives.

(4) If a sum within subsection (1) is paid with a view to the provision of benefits for or in respect of more than one employee of the employer, part of it is to be treated as paid for or in respect of each of them.

(5) The amount treated as paid for or in respect of each employee is—

where—

A is the sum paid,

B is the amount which would have had to be paid to secure the benefits to be provided for or in respect of the employee in question, and

C is the total amount which would have had to be paid to secure the benefits to be provided for or in respect of all the employees if separate payments had been made in the case of each of them.

(6) This section does not apply if—

(a) in the year of assessment in which the sum is paid the earnings from the employee’s employment are (or, if there are none, would be if there were any) earnings charged on remittance, or

(b) the employee is not domiciled in the United Kingdom in the tax year in which the sum is paid and the conditions in subsection (7) are met.

(7) Those conditions are—

(a) that the employment is with a foreign employer, and

(b) that, on a claim made by the employee, the Board are satisfied that the pension scheme corresponds to a registered pension scheme.

(8) In subsection (6)(a) “ earnings charged on remittance ” means earnings which are taxable earnings under—

(a) section 22 of ITEPA 2003 (chargeable overseas earnings for year when remittance basis applies and employee outside section 26 ), or

(b) section 26 of that Act (foreign earnings for year when remittance basis applies and employee meets section 26A requirement ).

(8A) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (6)(b).

(9) In this section—

“ employer-financed retirement benefits scheme ”, and
“ relevant benefits ”,
have the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see sections 393A and 393B of that Act).

267 Qualifying policies.

Schedule 15, Part I of which contains the basic rules for determining whether or not a policy is a qualifying policy, Part II of which makes provision for the certification etc. of policies as qualifying policies and Part III of which modifies Parts I and II in their application to certain policies issued by non-resident companies, shall have effect for the purpose of determining whether or not a policy is a qualifying policy; and, accordingly, any reference in this Act to a qualifying policy shall be construed in accordance with that Schedule.

268 Early conversion or surrender of life policies.

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269 Surrender etc. of policies after four years.

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

270 Provisions supplementary to sections 268 and 269.

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271 Deemed surrender in cases of certain loans.

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272 Collection of sums payable under sections 268 and 269.

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273 Payments securing annuities.

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

274 Limits on relief under section 266 .

(1) The aggregate of the premiums . . . in respect of which relief is given to any person under section 266 shall not exceed £1,500 in any year of assessment or one-sixth of that person’s total income, whichever is the greater.

(2) The aggregate of the relief given under section 266 in respect of premiums . . . payable for securing any benefits other than capital sums on death shall not exceed the amount of the income tax calculated at 12.5% on £100.

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

(4) War insurance premiums shall not be taken into account in calculating the limits of one-sixth of total income or of £100 mentioned in this section.

In this subsection “ war insurance premiums ” means any additional premium . . . paid in order to extend an existing life insurance policy to risks arising from war or war service abroad, and any part of any premium . . . paid in respect of a life insurance policy covering those risks, or either of them, which is attributable to those risks, or either of them.

Supplemental

275 Meaning of “relative”.

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

276 Effect on relief of charges on income.

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

277 Partners.

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

278 Non-residents.

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CHAPTER II TAXATION OF INCOME OF SPOUSES AND CIVIL PARTNERS

General rules

279 Aggregation of wife’s income with husband’s.

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280 Transfer of reliefs.

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281 Tax repayments to wives.

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282 Construction of references to spouses or civil partners living together.

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282A Jointly held property.

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282B Jointly held property: declarations.

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Separate assessments

283 Option for separate assessment.

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284 Effect of separate assessment on personal reliefs.

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285 Collection from wife of tax assessed on husband but attributable to her income.

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286 Right of husband to disclaim liability for tax on deceased wife’s income.

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Separate taxation

287 Separate taxation of wife’s earnings.

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288 Elections under section 287.

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CHAPTER III ENTERPRISE INVESTMENT SCHEME

289 Eligibility for relief.

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289A Form of relief.

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289B Attribution of relief to shares.

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290 Minimum and maximum subscriptions.

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290A Restriction of relief where amounts raised exceed permitted maximum.

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291 Individuals qualifying for relief.

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291A Connected persons: directors.

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291B Connected persons: persons interested in capital etc. of company.

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292 Parallel trades.

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293 Qualifying companies.

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294 Companies with interests in land.

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295 Valuation of interests in land for purposes of section 294(1)(b).

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296 Section 294 disapplied where amounts raised total £50,000 or less.

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297 Qualifying trades.

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298 Provisions supplementary to sections 293 and 297.

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299 Disposal of shares.

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299A Loan linked investments.

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299B Pre-arranged exits.

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300 Value received from company.

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300A Receipt of replacement value

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301 Provisions supplementary to section 300.

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301A Receipts of insignificant value: supplementary provision

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302 Replacement capital.

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303 Value received by persons other than claimants.

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303AA Insignificant repayments disregarded for purposes of s.303(1)

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303A Restriction on withdrawal of relief under section 303.

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304 Spouses and civil partners.

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305A Relief for loss on disposal of shares.

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306 Claims.

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307 Withdrawal of relief.

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308 Application to subsidiaries.

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309 Further provisions as to subsidiaries.

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310 Information.

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311 Nominees, bare trustees and approved investment funds.

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312 Interpretation of Chapter III.

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CHAPTER IV SPECIAL PROVISIONS

313 Taxation of consideration for certain restrictive undertakings.

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314 Divers and diving supervisors.

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315 Wounds and disability pensions.

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316 Allowances, bounties and gratuities.

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317 Victoria Cross and other awards.

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318 Other pensions in respect of death due to war service etc.

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319 Crown servants: foreign service allowance.

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320 Commonwealth Agents-General and official agents etc.

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321 Consuls and other official agents.

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322 Consular officers and employees.

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323 Visiting forces.

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324 Designated international organisations.

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325 Interest on deposits with National Savings Bank.

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326 Interest etc. under contractual savings schemes.

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326A Tax-exempt special savings accounts.

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326B Loss of exemption for special savings accounts.

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326BB Follow-up TESSAs.

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326C Tax-exempt special savings accounts: supplementary.

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326D Tax-exempt special savings accounts: tax representatives.

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327 Disabled person’s vehicle maintenance grant.

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327A Payments to adopters

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328 Funds in court.

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329 Interest on damages for personal injuries.

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329AA Personal injury damages in the form of periodical payments.

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329AB Compensation for personal injury under statutory or other schemes.

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329A Annuities purchased for certain persons.

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329B Annuities assigned in favour of certain persons.

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329C Annuities: criminal injuries.

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330 Compensation for National-Socialist persecution.

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331 Scholarship income.

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331A Student loans: certain interest to be disregarded.

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332 Expenditure and houses of ministers of religion.

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

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

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

(3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

332A Venture capital trusts: relief.

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333 Investment plan regulations

Regulations under Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans) may include provision generally for the purpose of the administration of corporation tax in relation to plans.

333A Personal equity plans: tax representatives.

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333B Involvement of insurance companies with plans and accounts.

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CHAPTER V RESIDENCE OF INDIVIDUALS

334 Commonwealth citizens and others temporarily abroad.

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335 Residence of persons working abroad.

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336 Temporary residents in the United Kingdom.

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PART VIII TAXATION OF INCOME AND CHARGEABLE GAINS OF COMPANIES

Taxation of income

337 Company beginning or ceasing to carry on trade

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

337A Computation of company’s profits or income: exclusion of general deductions

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

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

338 Charges on income deducted from total profits

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338A Meaning of “charges on income"

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338B Charges on income: annuities or other annual payments

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339 Charges on income: donations to charity.

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339A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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340 Charges on income: interest payable to non-residents.

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342 Tax on company in liquidation.

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342A Tax on companies in administration

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343 Company reconstructions without a change of ownership.

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343ZA Transfers of trade to obtain balancing allowances

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343A Company reconstructions involving business of leasing plant or machinery

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344 Company reconstructions: supplemental.

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Chargeable gains

345 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

346 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

347 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IX ANNUAL PAYMENTS AND INTEREST

Annual payments

347A General rule.

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347B Qualifying maintenance payments.

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348 Payments out of profits or gains brought into charge to income tax: deduction of tax.

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349 Payments not out of profits or gains brought into charge to income tax, and annual interest.

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349ZA Extension of section 349: proceeds of sale of UK patent rights

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349A Exceptions to section 349 for payments between companies etc

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349B The conditions mentioned in section 349A(1)

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349C Directions disapplying section 349A(1)

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349D Section 349A(1): consequences of reasonable but incorrect belief

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349E Deductions under section 349(1): payment of royalties overseas

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350 Charge to tax where payments made under section 349.

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350A UK public revenue dividends: deduction of tax.

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351 Small maintenance payments.

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352 Certificates of deduction of tax.

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Relief for payments of interest (excluding MIRAS)

353 General provision.

(1) Where a person pays interest in any year of assessment, that person, if he makes a claim to the relief, shall for that year of assessment be entitled (subject to . . . section 52 of ITTOIA 2005 ) to relief in accordance with this section in respect of so much (if any) of the amount of that interest as is eligible for relief under this section by virtue of section 365 .

(1A) Where a person is entitled for a year of assessment to relief under this section in respect of an amount of interest which is eligible for relief by virtue of section 365, the relief is given as a tax reduction for that tax year.

(1AA) The amount of the tax reduction is 23% of the amount of the interest.

(1AB) The tax reduction is given effect at Step 6 of the calculation in section 23 of ITA 2007.

(1B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1E) Where any person is entitled for any year of assessment to relief . . . in respect of any amount of interest as is eligible for that relief partly as mentioned in subsection (1A) above and partly as mentioned in section 383 of ITA 2007 (relief for interest payments) , that amount of interest shall be apportioned between the cases to which each of those provisions applies without regard to what parts of the total amount borrowed remain outstanding but according to . . . —

(a) the proportions of the total amount borrowed which were applied for different purposes; . . .

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

and subsection (1A) above or section 383 of ITA 2007 shall apply accordingly to the case in which that subsection or section applies .

(1F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1H) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) This section does not apply to a payment of relevant loan interest to which section 369 applies.

(3) Relief under this section shall not be given in respect of—

(a) interest on a debt incurred by overdrawing an account or by debiting the account of any person as the holder of a credit card or under similar arrangements; or

(b) where interest is paid at a rate in excess of a reasonable commercial rate, so much of the interest as represents the excess.

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

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

354 Loans to buy land etc.

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355 Matters excluded from section 354.

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356A Limit on relief for home loans: residence basis.

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356B Residence basis: married couples.

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356C Payments to which sections 356A and 356B apply.

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356D Provisions supplementary to sections 356A to 356C.

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357 Limit on amount of loan eligible for relief by virtue of section 354.

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357A Substitution of security.

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357B Treatment of loans following security substitution.

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357C Substitution of security: supplemental.

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358 Relief where borrower deceased.

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359 Loan to buy machinery or plant.

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360 Loan to buy interest in close company.

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

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361 Loan to buy interest in co-operative or employee-controlled company.

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362 Loan to buy into partnership.

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363 Provisions supplementary to sections 360 to 362.

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364 Loan to pay inheritance tax.

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365 Loan to buy life annuity.

(1) Subject to the following provisions of this section, interest is eligible for relief under section 353 if it is interest on a loan in respect of which the following conditions are satisfied—

(aa) that the loan was made before 9th March 1999;

(a) that the loan was made as part of a scheme under which not less than nine-tenths of the proceeds of the loan were applied to the purchase by the person to whom it was made of an annuity ending with his life or with the life of the survivor of two or more persons (“ the annuitants ”) who include the person to whom the loan was made;

(b) that at the time the loan was made the person to whom it was made or each of the annuitants had attained the age of 65 years;

(c) that the loan was secured on land in the United Kingdom or the Republic of Ireland and the person to whom it was made or one of the annuitants owns an estate or interest in that land; and

(d) that, if the loan was made after 26th March 1974, the person to whom it was made or each of the annuitants used the land on which it was secured as his only or main residence immediately before 9th March 1999 .

(1AA) Where—

(a) a loan made on or after 9th March 1999 was made in pursuance of an offer made by the lender before that date, and

(b) the offer was either in writing or evidenced by a note or memorandum made by the lender before that date,

the loan shall be deemed for the purposes of subsection (1)(aa) above to have been made before that date.

(1AB) Subject to subsection (1AC) below, the conditions in paragraphs (aa) and (a) of subsection (1) above shall be treated as satisfied in relation to a loan (“ the new loan ”) if—

(a) the new loan was made on or after the day on which the Finance Act 1999 was passed;

(b) the new loan was made as part of a scheme (“ the scheme ”) under which the whole or any part of the proceeds of the loan was used to defray money applied in paying off another loan (“ the old loan ”); and

(c) the conditions in subsection (1) above were, or were treated by virtue of this subsection as, satisfied with respect to the old loan.

(1AC) If only part of the proceeds of the new loan was used to defray money applied in paying off the old loan, subsection (1AB) above applies only if, under the scheme, not less than nine-tenths of the remaining part of the proceeds of the new loan was applied to the purchase by the person to whom it was made of an annuity ending with his life or with the life of the survivor of two or more persons who include him.

(1AD) In subsection (1AC) above “ the remaining part ” means the part of the proceeds of the new loan that was not used to defray money applied in paying off the old loan.

(1A) The condition in subsection (1)(d) above shall be treated as satisfied in relation to a loan if—

(a) the person to whom the loan was made, or any of the annuitants, ceased to use the land as his only or main residence at a time falling within the period of twelve months ending with 8th March 1999, and

(b) the intention at that time of the person to whom the loan was made, or each of the annuitants owning an estate or interest in the land, was to take steps, before the end of the period of twelve months after the day on which the land ceased to be so used, with a view to the disposal of his estate or interest.

(1B) If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case subsection (1A) above shall have effect as if for the reference to 12 months there were substituted a reference to such longer period as meets the circumstances of that case.

(2) Interest is not eligible for relief by virtue of this section unless it is payable by the person to whom the loan was made or by one of the annuitants.

(3) If the loan was made after 26th March 1974 interest on it is eligible for relief by virtue of this section only to the extent that the amount on which it is payable does not exceed the sum of £30,000 ; and if the interest is payable by two or more persons the interest payable by each of them is so eligible only to the extent that the amount on which it is payable does not exceed such amount as bears to that sum the same proportion as the interest payable by him bears to the interest payable by both or all of them.

366 Information.

(1) A person who claims relief under section 353 in respect of any payment of interest shall furnish to the inspector a statement in writing by the person to whom the payment is made, showing—

(a) the date when the debt was incurred;

(b) the amount of the debt when incurred;

(d) the name and address of the debtor.

(2) Where any such interest as is mentioned in section 353 is paid, the person to whom it is paid shall, if the person who pays it so requests in writing, furnish him with such statement as regards that interest as is mentioned in subsection (1) above; and the duty imposed by this subsection shall be enforceable at the suit or instance of the person making the request.

(3) Subsections (1) and (2) above do not apply to interest paid to a building society, or to a local authority.

367 Provisions supplementary to sections 354 to 366.

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

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

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

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

(5) In section 365(3) references to the qualifying maximum for the year of assessment are references to such sum as Parliament may determine for the purpose for that year.

367A Alternative finance arrangements

(1) Sections 353 and 365 have effect as if—

(a) purchase and resale arrangements involved the making of a loan, and

(b) alternative finance return were interest.

(2) Section 366 has effect accordingly.

(3) In this section—

“ alternative finance return ” has the meaning given in sections 564I to 564L of ITA 2007, and
“ purchase and resale arrangements ” means arrangements to which section 564C of ITA 2007 applies.

368 Exclusion of double relief etc.

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Mortgage interest relief at source

369 Mortgage interest payable under deduction of tax.

(1) If a person who is a qualifying borrower makes a payment of relevant loan interest to which this section applies, he shall be entitled, on making the payment, to deduct and retain out of it a sum equal to the applicable percentage thereof.

(1A) In subsection (1) above “ the applicable percentage ” means 23 per cent. .

(2) Where a sum is deducted under subsection (1) above from a payment of relevant loan interest—

(a) the person to whom the payment is made shall allow the deduction on receipt of the residue;

(b) the borrower shall be acquitted and discharged of so much money as is represented by the deduction as if the sum had been actually paid; and

(3) The following payments, that is to say—

(a) payments of relevant loan interest to which this section applies, and

(b) payments which would be such payments but for section 373(5),

shall not be allowable as deductions for any purpose of the Income Tax Acts except in so far as they fall to be treated as such payments by virtue only of section 375(2) and would be allowable apart from this subsection.

(6) Sections 967(2) and 968(2) of CTA 2010 do not apply to a payment of relevant loan interest to which this section applies, but any person by whom such a payment is received shall be entitled to recover from the Board, in accordance with regulations, an amount which by virtue of subsection (2)(c) above is treated as income tax paid by him; and any amount so recovered shall be treated for the purposes of the Tax Acts in like manner as the payment of relevant loan interest to which it relates.

(7) The following provisions of the Management Act, namely—

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

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

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

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

(8) In the application of section 86 of the Management Act by virtue of subsection (7) above in relation to sums due and payable by virtue of an assessment made for the whole or part of a year of assessment (“the relevant year of assessment”) under section 29(1)(c) or 30 of that Act, as applied by that subsection, the relevant date—

(a) is 1st January in the relevant year of assessment in a case where the person falling within subsection (6) above has made a relevant interim claim; and

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

(i) 1st January in the relevant year of assessment; or

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

(9) In this section—

“ financial year ”, in relation to any person, means a financial year of that person for the purposes of the relevant regulations;
“ interim claim ” means an interim claim within the meaning of the relevant regulations;
“ relevant interim claim ” means, in relation to an assessment made for a period coterminous with, or falling wholly within, a person’s financial year, an interim claim made for a period falling wholly or partly within that financial year; and
“ the relevant regulations ” means regulations made under section 378(3) for the purposes of subsection (6) above.

370 Relevant loan interest.

(1) Subject to this section and sections 373 to 376, in this Part “ relevant loan interest ” means interest which is paid and payable in the United Kingdom to a qualifying lender and to which subsection (2) . . . below applies.

(2) Subject to subsection (4) below, this subsection applies to interest if, disregarding section 353(2) and any other provision applying to interest falling to be treated as relevant loan interest —

(a) it is interest falling within section . . . 365; and

(b) apart (where applicable) from section . . . 365(3), the whole of the interest would be eligible for relief under section 353 ; . . .

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

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

(5) In determining whether subsection (2) above applies to any interest, section 365 shall have effect as if the words “or the Republic of Ireland” were omitted.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

371 Second loans.

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372 Home improvement loans.

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373 Loans in excess of the qualifying maximum, and joint borrowers.

(1) The provisions of this section have effect in relation to a loan where, by virtue of . . . section 365(3), only part of the interest on the loan would (apart from section 353(2)) be eligible for relief under section 353; and in this section any such loan is referred to as a “ limited loan ”.

(2) None of the interest on a limited loan is relevant loan interest unless—

(a) the loan is made on or after 6th April 1987; or

(b) the qualifying lender to whom the interest is payable has given notice to the Board in accordance with regulations that he is prepared to have limited loans of a description which includes that limited loan brought within the tax deduction scheme.

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

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

(5) Where the condition in paragraph (a) or (b) of subsection (2) above is fulfilled . . . only so much of the interest as (apart from section 353(2)) would be eligible for relief under section 353 is relevant loan interest.

(6) Where a loan on which interest is payable by the borrower was made jointly to the borrower and another person who is not the borrower’s husband or wife, the interest on the loan is not relevant loan interest unless—

(a) each of the persons to whom the loan was made is a qualifying borrower; and

(b) in relation to each of them considered separately, the whole of that interest is relevant loan interest, in accordance with section 370 and this section.

(7) In subsection (6) above references to the borrower’s husband or wife do not include references to a separated husband or wife . . . .

374 Conditions for application of section 369.

(1) Section 369 does not apply to any relevant loan interest unless—

(a) in the case of a loan of a description specified by regulations for the purposes of this paragraph, the borrower or, in the case of joint borrowers, each of them has given notice to the lender in the prescribed form certifying—

(i) that he is a qualifying borrower; and

(ii) that the interest is relevant loan interest; and

(iii) such other matters as may be prescribed; or

(b) the Board have given notice to the lender and the borrower that the interest may be paid under deduction of tax; or

(d) the loan to which the interest relates is of a description specified by regulations for the purposes of this paragraph and was made—

(i) if sub-paragraph (2) of paragraph 2 of Schedule 7 to the Finance Act 1982 applied to interest on the loan which became due on or after a date earlier than 6th April 1983, being a date specified by the Board in pursuance of sub-paragraph (5) of that paragraph, before that earlier date; or

(ii) if the qualifying lender is a building society or a local authority, before 1st April 1983; or

(iii) if sub-paragraphs (i) and (ii) above do not apply and the interest falls within section 370(2), before 6th April 1983.

(2) Where notice has been given as mentioned in paragraph (a) or (b) of subsection (1) above, section 369 applies to any relevant loan interest to which the notice relates and which becomes due on or after the relevant date, as defined by subsection (3) below; and in a case falling within paragraph . . . (d) of subsection (1) above, section 369 applies to the relevant loan interest referred to in that paragraph.

(3) In subsection (2) above “ the relevant date ” means—

(a) in the case of a notice under subsection (1)(a) above, the date the notice is given, and

(b) in the case of a notice under subsection (1)(b) above, a date specified in the notice as being the relevant date (which may be earlier than the date so specified as the date from which the interest may be paid under deduction of tax).

374A Interest which never has been relevant loan interest etc.

(1) This section applies where, in the case of any loan, interest on the loan never has been relevant loan interest or the borrower never has been a qualifying borrower.

(2) Without prejudice to subsection (3) below, in relation to a payment of interest—

(a) as respects which either of the conditions mentioned in paragraphs (a) and (b) of section 374(1) is fulfilled, and

(b) from which a deduction was made as mentioned in section 369(1),

section 369 shall have effect as if the payment of interest were a payment of relevant loan interest made by a qualifying borrower.

(3) Nothing in subsection (2) above shall be taken as regards the borrower as entitling him to make any deduction or to retain any amount deducted and, accordingly, where any amount has been deducted, he shall be liable to make good that amount and an officer of the Board may make such assessments as may in his judgment be required for recovering that amount.

(4) The Management Act shall apply to an assessment under subsection (3) above as if it were an assessment to income tax for the year of assessment in which the deduction was made . . . .

(5) If the borrower fraudulently or negligently makes any false statement or representation in connection with the making of any deduction, he shall be liable to a penalty not exceeding the amount deducted.

375 Interest ceasing to be relevant loan interest, etc.

(1) If at any time—

(a) the interest on a loan ceases to be relevant loan interest; or

(b) a person making payments of relevant loan interest ceases to be a qualifying borrower;

the borrower shall give notice of the fact to the lender.

(2) Without prejudice to subsection (3) below, in relation to a payment of interest—

(a) which is due after the time referred to in subsection (1) above and before the date on which notice is given under that subsection, and

(aa) as respects which any of the conditions mentioned in section 374(1) is fulfilled, and

(b) from which a deduction was made as mentioned in section 369(1),

section 369 shall have effect as if the payment were a payment of relevant loan interest made by a qualifying borrower.

(3) Nothing in subsection (2) above shall be taken as regards the borrower as entitling him to any deduction or to retain any amount deducted and, accordingly, where any amount that has been deducted exceeds the amount which ought to have been deducted , he shall be liable to make good the excess and an inspector may make such assessments as may in his judgment be required for recovering the excess.

(4) The Management Act shall apply to an assessment under subsection (3) above as if it were an assessment to income tax for the year of assessment in which the deduction was made .

(4A) If there is any unreasonable delay in the giving of a notice under subsection (1) above, the borrower shall be liable to a penalty not exceeding so much of the aggregate amount that he is liable to make good under subsection (3) above as is attributable to that delay.

(5) If, as a result of receiving a notice under subsection (1) above or otherwise, a qualifying lender has reason to believe that any interest is no longer relevant loan interest or that a borrower is no longer a qualifying borrower, the lender shall furnish the Board with such information as is in his possession with respect to those matters.

(6) Where it appears to the Board that any of the provisions of sections 370 to 373 is not or may not be fulfilled with respect to any interest, or that a qualifying borrower has or may have ceased to be a qualifying borrower, they shall give notice of that fact to the lender and the borrower specifying the description of relevant loan interest concerned or, as the case may be, that the borrower has or may have ceased to be a qualifying borrower.

(7) Section 369 shall not apply to any payment of relevant loan interest of a description to which a notice under subsection (6) above relates and which becomes due or is made after such date as may be specified in the notice and before such date as may be specified in a further notice given by the Board to the lender and the borrower.

(8) In any case where—

(a) section 369 applies to any relevant loan interest by virtue of a notice under section 374(1)(b), and

(b) the relevant date specified in the notice is earlier than the date from which the interest begins to be paid under deduction of tax, and

regulations may provide for a sum to be paid by the Board of an amount equal to that which the borrower would have been able to deduct from that payment by virtue of section 369 if it had been made after the relevant date.

(8A) In any case where an amount to which a person is not entitled is paid to him by the Board in pursuance of regulations made by virtue of subsection (8) above, regulations may—

(a) provide for an officer of the Board to make such assessments as may in his judgment be required for recovering that amount from that person; and

(b) make provision corresponding to that made by subsection (4A) above and subsections (4) and (5) of section 374A.

(8B) Subsections (1), (5) and (6) above shall not apply where interest ceases to be relevant loan interest by virtue of section 38 of the Finance Act 1999.

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

375A Option to deduct interest for the purposes of Schedule A.

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376 Qualifying borrowers and qualifying lenders.

(1) Subject to subsection (2) below, an individual is a qualifying borrower with respect to the interest on any loan.

(2) In relation to interest paid at a time when the borrower or the borrower’s husband or wife holds an office or employment which would, but for some special exemption or immunity from tax, be a taxable employment under Part 2 of ITEPA 2003 (as defined by section 66(3) of that Act) , the borrower is not a qualifying borrower.

(3) In subsection (2) above references to the borrower’s husband or wife do not include references to a separated husband or wife . . . .

(4) The following bodies are qualifying lenders:—

(a) a building society;

(b) a local authority;

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

(e) a person who has permission under Part 4A of the Financial Services and Markets Act 2000 to effect or carry out contracts of long-term insurance;

(f) any company to which property and rights belonging to a trustee savings bank were transferred by section 3 of the Trustee Savings Bank Act 1985;

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

(h) a development corporation within the meaning of the New Towns Act 1981 or the New Towns (Scotland) Act 1968;

(j) the Homes and Communities Agency;

(ja) the Greater London Authority so far as exercising its housing or regeneration functions or its new towns and urban development functions;

(k) the Regulator of Social Housing,

(ka) the Secretary of State if the loan is made by him under section 79 of the Housing Associations Act 1985;

(l) the Northern Ireland Housing Executive;

(m) the Scottish Special Housing Association;

(n) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(o) the Church of England Pensions Board;

(p) any body which is for the time being registered under section 376A.

(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

376A The register of qualifying lenders.

(1) The Board shall maintain, and publish in such manner as they consider appropriate, a register for the purposes of section 376(4).

(1A) The following are entitled to be registered—

(a) a person who has permission under Part 4A of the Financial Services and Markets Act 2000—

(i) to accept deposits; or

(ii) to effect or carry out contracts of general insurance;

(b) a 90 per cent subsidiary of a person mentioned in—

(i) section 376(4)(e); or

(ii) paragraph (a) above;

(2) If the Board are satisfied that an applicant for registration is entitled to be registered, they may register the applicant generally or in relation to any description of loan specified in the register, with effect from such date as may be so specified; and a body which is so registered shall become a qualifying lender in accordance with the terms of its registration.

(3) The registration of any body may be varied by the Board—

(a) where it is general, by providing for it to be in relation to a specified description of loan, or

(b) where it is in relation to a specified description of loan, by removing or varying the reference to that description of loan,

and where they do so, they shall give the body written notice of the variation and of the date from which it is to have effect.

(4) If it appears to the Board at any time that a body which is registered under this section would not be entitled to be registered if it applied for registration at that time, the Board may by written notice given to the body cancel its registration with effect from such date as may be specified in the notice.

(5) The date specified in a notice under subsection (3) or (4) above shall not be earlier than the end of the period of 30 days beginning with the date on which the notice is served.

(6) Any body which is aggrieved by the failure of the Board to register it under this section, or by the variation or cancellation of its registration, may appeal , by notice given to the Board before the end of the period of 30 days beginning with the date on which the body is notified of the Board’s decision . . . .

377 Variation of terms of repayment of certain loans.

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378 Supplementary regulations.

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

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

(3) The Board may by regulations make provision—

(a) for the purposes of any provision of sections 369 to 376A which relates to any matter or thing to be specified by or done in accordance with regulations;

(b) for the application of those sections in relation to loan interest paid by personal representatives and trustees;

(c) with respect to the furnishing of information by borrowers or lenders, including, in the case of lenders, the inspection of books, documents and other records on behalf of the Board;

(d) for, and with respect to, appeals to the tribunal against the refusal of the Board to issue a notice under section 374(1)(b) or the issue of a notice under section 375(6) or (7); and

(e) generally for giving effect to sections 369 to 376A .

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

379

In sections 369 to 378—

“contracts of general insurance” means contracts which fall within Part I of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and “contracts of long-term insurance” means contracts which fall within Part II of that Schedule;
“ prescribed ” . . . means prescribed by the Board;
“ qualifying borrower ” has the meaning given by section 376(1) to (3);
“ qualifying lender ” has the meaning given by section 376(4) . . . ;
“ regulations ” . . . means regulations made by the Board under section 378;
“ relevant loan interest ” has the meaning given by section 370(1);
“ separated ” means separated under an order of a court of competent jurisdiction or by deed of separation or in such circumstances that the separation is likely to be permanent.

PART X LOSS RELIEF AND GROUP RELIEF

CHAPTER I LOSS RELIEF: INCOME TAX

Losses from UK property business or overseas property business

379A Losses from UK property business .

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

379B Losses from overseas property business.

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

Trade etc. losses

380 Set-off against general income.

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

381 Further relief for individuals for losses in early years of trade.

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

382 Provisions supplementary to sections 380 and 381.

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

383 Extension of right of set-off to capital allowances.

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

384 Restrictions on right of set-off.

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

384A Restriction of set-off of allowances against general income

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

385 Carry-forward against subsequent profits.

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

386 Carry-forward where business transferred to a company.

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

387 Carry-forward as losses of amounts taxed under section 350.

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

388 Carry-back of terminal losses.

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

389 Supplementary provisions relating to carry-back of terminal losses.

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

390 Treatment of interest as a loss for purposes of carry-forward and carry-back.

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

391 Losses from trade etc. carried on abroad

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

Case VI losses

392 Losses from miscellaneous transactions

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

CHAPTER II LOSS RELIEF: CORPORATION TAX

Losses from UK property business or overseas property business

392A UK property business losses

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

392B Losses from overseas property business.

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

Trade etc. losses

393 Losses other than terminal losses.

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

393A Losses: set off against profits of the same, or an earlier, accounting period.

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

393B Losses of ring fence trade: set off against profits of an earlier accounting period

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

394 Terminal losses.

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

395 Leasing contracts and company reconstructions.

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

Case VI losses

396 Losses from miscellaneous transactions

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

CHAPTER III LOSS RELIEF: MISCELLANEOUS PROVISIONS

397 Restriction of relief in case of farming and market gardening.

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

398 Transactions in deposits with and without certificates or in debts.

Where a company sustains a loss on the exercise or disposal of a right to receive any amount, being a right to which section 56(2) . . . applies, in a case where—

(a) if a profit had arisen from that exercise or disposal, that profit would have been chargeable to corporation tax by virtue of section 56(2) . . . , and

(b) the company is chargeable to corporation tax under Part 5 of CTA 2009 (loan relationships) in respect of interest payable on that amount,

then the amount of that interest shall be included in the amounts against which the amount of its loss may be set off under section 91 of CTA 2010 .

399 Dealings in commodity futures etc: withdrawal of loss relief.

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

400 Write-off of government investment.

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

401 Relief for pre-trading expenditure.

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

CHAPTER IV GROUP RELIEF

402 Surrender of relief between members of groups and consortia.

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

403 Losses etc. which may be surrendered by way of group relief.

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

403ZA Amounts eligible for group relief: trading losses.

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

403ZB Amounts eligible for group relief: excess capital allowances.

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

403ZC Amounts eligible for group relief: non-trading deficit on loan relationships.

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

403ZD Other amounts available by way of group relief.

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

403ZE Computation of gross profits.

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

403A Limits on group relief.

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

403B Apportionments under section 403A.

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

403C Amount of relief in consortium cases.

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

403D Relief for or in respect of UK losses of non-resident companies

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

403E Relief for overseas losses of UK resident companies.

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

403F Relief in respect of overseas losses of non-resident companies

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

403G Unallowable overseas losses of non-resident companies

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

404 Limitation of group relief in relation to certain dual resident companies.

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

405 Claims relating to losses etc. of members of both group and consortium.

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

406 Claims relating to losses etc. of consortium company or group member.

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

407 Relationship between group relief and other relief.

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

408 Corresponding accounting periods.

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

409 Companies joining or leaving group or consortium.

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

410 Arrangements for transfer of company to another group or consortium.

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

411 Exclusion of double allowances.

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

411ZA No relief where deduction of relevant return under alternative finance arrangements disallowed

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

411A Group relief by way of substitution for loss relief.

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

412 Claims and adjustments.

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

413 Interpretation of Chapter IV.

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

PART XI CLOSE COMPANIES

CHAPTER I INTERPRETATIVE PROVISIONS

414 Close companies.

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

415 Certain quoted companies not to be close companies.

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

416 Meaning of “associated company” and “control”.

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

417 Meaning of “participator”, “associate”, “director” and “loan creditor”.

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

Additional matters to be treated as distributions

418 “Distribution” to include certain expenses of close companies.

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

CHAPTER II CHARGES TO TAX IN CONNECTION WITH LOANS

419 Loans to participators etc.

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

420 Exceptions from section 419.

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

421 Taxation of borrower when loan under section 419 released etc

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

422 Extension of section 419 to loans by companies controlled by close companies.

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

CHAPTER III APPORTIONMENT OF UNDISTRIBUTED INCOME ETC.

423 Apportionment of certain income, deductions and interest.

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

424 Exclusions from section 423.

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

425 Manner of apportionment.

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

426 Charge to income tax where apportionment is to an individual.

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

427 Reduction of charge under section 426 in certain cases.

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

428 Increase of apportioned sum etc. by reference to ACT.

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

429 Payment and collection of income tax.

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

430 Consequences of apportionment: ACT.

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

PART XII SPECIAL CLASSES OF COMPANIES AND BUSINESSES

CHAPTER I INSURANCE COMPANIES, UNDERWRITERS AND CAPITAL REDEMPTION BUSINESS

Insurance companies: general

431 Interpretative provisions relating to insurance companies.

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

431ZA Election that assets not be foreign business assets

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

431A Amendment of Chapter etc

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

431AA Relevant benefits for purposes of section 431(4)(d) and (e).

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

Classes of life assurance business

431B Meaning of “pension business”.

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

431BA Meaning of “child trust fund business”

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

431BB Meaning of “individual savings account business”

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

431C Meaning of “life reinsurance business”.

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

431D Meaning of “overseas life assurance business”.

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

431E Overseas life assurance business: regulations.

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

431EA Meaning of “gross roll-up business”

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

431F Meaning of “basic life assurance and general annuity business”.

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

Basis of taxation etc

431G Company carrying on life assurance business

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

431H Company carrying on life assurance business and other insurance business

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

432 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

432YA PHI business other than life assurance business — adjustment consequent on change in Insurance Prudential Sourcebook

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

432ZA Linked assets.

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

432A Apportionment of income and gains.

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

432AA UK property business or overseas property business

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

432AB Losses from UK property business or overseas property business.

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

432B Apportionment of receipts brought into account.

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

432C Section 432B apportionment: non-participating funds

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

432CA Apportionment of asset value increase where line 51 amount decreases

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

432CB Transfers of business involving excess assets

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

432D Section 432B apportionment: value of non-participating funds.

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

432E Section 432B apportionment: participating funds.

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

432F Section 432B apportionment: supplementary provisions.

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

432G Section 432B apportionment: business transfers-in

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

433 Profits reserved for policy holders and annuitants.

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

Miscellaneous provisions relating to life assurance business

434 Franked investment income etc.

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

434A Computation of losses and limitation on relief.

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

434AZA Reduced loss relief for additions to non-profit funds

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

434AZB Additions to non-profit funds: amount of loss reduction

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

434AZC Sections 434AZA and 434AZB: supplementary

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

434B Treatment of interest and annuities.

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

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

434C Interest on repayment of advance corporation tax.

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

434D Capital allowances: management assets.

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

434E Capital allowances: investment assets.

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

435 Taxation of gains reserved for policy holders and annuitants.

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

436 Pension business : separate charge on profits.

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

436A Gross roll-up business: separate charge on profits

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

436B Gains referable to gross roll-up business not to be chargeable gains

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

437 General annuity business.

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

437A Meaning of “steep-reduction annuity” etc.

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

438 Pension business: exemption from tax.

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

438A Pension business: payments on account of tax credits and deducted tax.

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

438B Income or gains arising from property investment LLP

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

439 Restricted government securities.

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

439A Taxation of pure reinsurance business.

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

439B Life reinsurance business: separate charge on profits.

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

440 Transfers of assets etc.

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

440A Securities.

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

440B Modifications where tax charged under section 35 of CTA 2009 .

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

440C Modifications for change of tax basis

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

440D Modifications in relation to BLAGAB group reinsurers

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

441 Overseas life assurance business.

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

441A Section 441: distributions.

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

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

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

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

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

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

441B Treatment of UK land.

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

442 Overseas business of U.K. companies.

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

442A Taxation of investment return where risk reinsured.

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

443 Life policies carrying rights not in money.

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

444 Life policies issued before 5th August 1965.

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

444A Transfers of business.

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

444AZA Transfers of life assurance business: gross roll-up business losses of the transferor

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

444AZB Transfers of life assurance business: trade losses of the transferor

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

444AA Transfers of business: deemed periodical returns

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

444AB Transfer schemes: transferor

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

444ABA Non long-term fund transferred assets

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

444ABAA Non-profit fund transferred assets

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

444ABB Retained assets

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

444ABBA Transfers of business: election for transferee to pay tax of transferor

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

444ABC Transfer scheme transferring part of business: transferor

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

444ABD Transferor's period of account including transfer

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

444AC Transfer schemes: reduction of income of transferee

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

444ACZA Transfer schemes transferring part of business: reduction in income of transferee

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

444ACA Transfers of business: transferor shares are assets of transferee's long-term insurance fund etc

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

444AD Transfers of business: modification of s.83(2B) FA 1989

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

444AE Transfers of business: FAFTS

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

444AEA Transfer schemes: anti-avoidance rule

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

444AEB Life assurance trade profits advantage: transferor

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

444AEC Life assurance trade profits advantage: transferee

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

444AECA Parts of transfer scheme arrangements: anti-avoidance rule

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

444AECB Parts of transfer scheme arrangements: life assurance trade profits advantage transferor

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

444AECC Parts of transfer scheme arrangements: life assurance trade profits advantage transferee

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

444AED Clearance: no avoidance or group advantage

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

Surpluses of mutual and former mutual businesses

444AF Demutualisation surplus: life assurance business

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

444AG Section 444AF: “demutualisation transfer surplus”

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

444AH Modification of section 444AG etc for gross roll-up businesses

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

444AI Section 444AF: “reduction in company's unappropriated surplus”

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

444AJ Sections 444AF and 444AK: “relevant receipts reduction”

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

444AK Mutual surplus: gross roll-up business

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444AL Interpretation of sections 444AF to 444AK

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Provisions applying in relation to overseas life insurance companies

444B Modification of Act in relation to overseas life insurance companies.

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

Equalisation reserves

444BA Equalisation reserves for general business.

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

444BB Modification of s. 444BA for mutual or overseas business and for non-resident companies.

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444BC Modification of s. 444BA for non-annual accounting etc.

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

444BD Application of s. 444BA rules to other equalisation reserves.

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

444C Modification of section 440.

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

444D Qualifying distributions, tax credits, etc.

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

444E Income from investments attributable to BLAGAB, etc.

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

Provisions applying only to overseas life insurance companies

445 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

446 Annuity business.

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

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

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

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

447

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

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

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

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

448 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

449 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Underwriters

450 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

451 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

452 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

453 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

454 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

455 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

456 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

457 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital redemption business

458 Capital redemption business.

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458A Capital redemption business: power to apply life assurance provisions.

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CHAPTER II FRIENDLY SOCIETIES, TRADE UNIONS AND EMPLOYERS’ ASSOCIATIONS

Unregistered friendly societies

459 Exemption from tax.

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Registered friendly societies

460 Exemption from tax in respect of life or endowment business.

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461 Taxation in respect of other business.

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461A Taxation in respect of other business: incorporated friendly societies qualifying for exemption.

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461B Taxation in respect of other business: incorporated friendly societies etc.

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461C Taxation in respect of other business: withdrawal of “qualifying” status from incorporated friendly society.

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461D Transfers of other business

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462 Conditions for tax exempt business.

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462A Election as to tax exempt business.

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463 Long-term business: application of the Corporation Tax Acts.

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464 Maximum benefits payable to members.

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465 Old societies.

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

465A Assets of branch of registered friendly society to be treated as assets of society after incorporation.

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466 Interpretation of Chapter II.

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Trade unions and employers’ associations

467 Exemption for trade unions and employers’ associations.

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CHAPTER III UNIT TRUST SCHEMES, DEALERS IN SECURITIES ETC.

Unit trust schemes

468 Authorised unit trusts.

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468AA Authorised unit trusts: futures and options.

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468A Certified unit trusts.

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468A Open-ended investment companies

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

468B Certified unit trusts: corporation tax.

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468C Certified unit trusts: distributions.

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468D Funds of funds: distributions.

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468E Authorised unit trusts: corporation tax.

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468EE Corporation tax: cases where lower rate applies.

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468F Authorised unit trusts: distributions.

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468G Dividends paid to investment trusts.

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Distributions of authorised unit trusts: general

468H Interpretation.

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468I Distribution accounts.

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Dividend and foreign income distributions

468J Dividend distributions.

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468K Foreign income distributions.

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Interest distributions

468L Interest distributions.

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468M Cases where no obligation to deduct tax

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468N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

468O Residence condition and reputable intermediary condition .

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468P Residence declarations.

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468PA Section 468O(1A): consequences of reasonable but incorrect belief

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468PB Regulations supplementing sections 468M to 468PA

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Distributions to corporate unit holder

468Q Dividend distribution to corporate unit holder.

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468R Foreign income distribution to corporate unit holder.

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469 Other unit trusts.

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469A Court common investment funds.

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470 Transitional provisions relating to unit trusts.

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

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

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

Dealers in securities, banks and insurance businesses

471 Exchange of securities in connection with conversion operations, nationalisation etc.

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472 Distribution of securities issued in connection with nationalisation etc.

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

472A Trading profits etc. from securities: taxation of amounts taken to reserves

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473 Conversion etc. of securities held as circulating capital.

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474 Treatment of tax-free income.

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

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

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

475 Tax-free Treasury securities: exclusion of interest on borrowed money.

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CHAPTER IV BUILDING SOCIETIES, BANKS, SAVINGS BANKS, INDUSTRIAL AND PROVIDENT SOCIETIES AND OTHERS

476 Building societies: regulations for payment of tax.

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

477 Investments becoming or ceasing to be relevant building society investments.

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477A Building societies: loan relationships .

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477B Building societies: incidental costs of issuing qualifying shares.

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478 Building societies: time for payment of tax.

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

479 Interest paid on deposits with banks etc.

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480 Deposits becoming or ceasing to be composite rate deposits.

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480A Relevant deposits: deduction of tax from interest payments.

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480B Relevant deposits: exception from section 480A.

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480C Relevant deposits: computation of tax on interest.

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481 “Deposit-taker”, “deposit” and “relevant deposit”.

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

482 Supplementary provisions.

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482A Audit powers in relation to non-residents.

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483 Determination of reduced rate for building societies and composite rate for banks etc.

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

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

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

(4) If the order made under section 26 of the Finance Act 1984 in the year 1987-88 is made in pursuance of subsection (4) of that section, that order shall, notwithstanding that that subsection is not re-enacted by this Act, apply for the purposes of sections 476 and 479 for the year 1988-89.

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

484 Savings banks: exemption from tax.

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

485 Savings banks: supplemental.

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

486 Industrial and provident societies and co-operative associations.

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487 Credit unions.

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

488 Co-operative housing associations.

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

489 Self-build societies.

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490 Companies carrying on a mutual business or not carrying on a business.

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491 Distribution of assets of body corporate carrying on mutual business.

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CHAPTER V

PETROLEUM EXTRACTION ACTIVITIES

492 Treatment of oil extraction activities etc. for tax purposes.

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

493 Valuation of oil disposed of or appropriated in certain circumstances.

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

494 Loan relationships etc.

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

494AA Sale and lease-back.

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494A Computation of amount available for surrender by way of group relief.

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

495 Regional development grants.

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

496 Tariff receipts and tax-exempt tariffing receipts

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

496A Exploration expenditure supplement

Schedule 19B to this Act (exploration expenditure supplement) shall have effect.

496B Ring fence expenditure supplement

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

497 Restriction on setting ACT against income from oil extraction activities etc.

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

498 Limited right to carry back surrendered ACT.

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

499 Surrender of ACT where oil extraction company etc. owned by a consortium.

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

500 Deduction of PRT in computing income for corporation tax purposes.

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

501 Interest on repayment of PRT.

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

501A Supplementary charge in respect of ring fence trades

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

501B Assessment, recovery and postponement of supplementary charge

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

502 Interpretation of Chapter V.

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

Chapter 5A Special rules for long funding leases of plant or machinery: corporation tax

Introductory

502A Scope of Chapter 5A

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

Lessors under long funding finance leases

502B Lessor under long funding finance lease: rental earnings

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

502C Lessor under long funding finance lease: exceptional items

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

502D Lessor under long funding finance lease making termination payment

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

Lessors under long funding operating leases

502E Lessor under long funding operating lease: periodic deduction

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

502F Long funding operating lease: lessor's additional expenditure

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

502G Lessor under long funding operating lease: termination of lease

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

Lessors under long funding finance or operating leases: avoidance etc

502GA Cases where ss. 502B to 502G do not apply: plant or machinery held as trading stock

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

502GB Cases where ss. 502B to 502G do not apply: lessor also lessee under non-long funding lease

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

502GC Cases where ss. 502B to 502G do not apply: other avoidance

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

502GD Cases where ss 502B to 502G do not apply: films

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Insurance company as lessor

502H Insurance company as lessor

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

Lessees under long funding finance leases

502I Lessee under long funding finance lease: limit on deductions

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

502J Lessee under long funding finance lease: termination

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

Lessees under long funding operating leases

502K Lessee under long funding operating lease

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

Interpretation of Chapter

502L Interpretation of this Chapter

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

CHAPTER VI MISCELLANEOUS BUSINESSES AND BODIES

503 Letting of furnished holiday accommodation treated as a trade for certain corporation tax purposes.

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

504 Supplementary provisions.

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

504A Letting of furnished holiday accommodation treated as trade for certain income tax purposes

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

505 Charitable companies : general.

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

506 Charitable and non-charitable expenditure

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

506A Transactions with substantial donors

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

506B Section 506A: exceptions

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

506C Sections 506A and 506B: supplemental

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

507 The National Heritage Memorial Fund, the Historic Buildings and Monuments Commission for England and the British Museum.

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

508 Scientific research organisations.

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

508A Investment trusts investing in housing.

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

508B Interpretation of section 508A.

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

508A Contemplative religious communities: profits exempt from corporation tax

(1) Subsection (2) applies in a case where members of a qualifying contemplative religious community transfer all their income and assets, or covenant all their income, to the community (“the independent community”) (and for this purpose it is irrelevant whether or not the community is part of an order or religious institution).

(2) As respects each chargeable period of the independent community, and each person who is a qualifying member of the independent community at any time in that period, the independent community shall be treated for the purposes of corporation tax as if an amount of its profits for the chargeable period equal to the relevant amount (see subsections (5) to (7)) were income of the qualifying member.

(3) Subsection (4) applies in a case where—

(a) one or more qualifying contemplative religious communities (“constituent communities”) are part of an order or religious institution (“the parent body”), and

(b) members of the constituent communities transfer all their income and assets, or covenant all their income, to the parent body.

(4) As respects each chargeable period of the parent body, and each person who is a qualifying member of a constituent community at any time in that period, the parent body shall be treated for the purposes of corporation tax as if an amount of its profits for the chargeable period equal to the relevant amount (see subsections (5) to (7)) were income of the qualifying member.

(5) For the purposes of subsections (2) and (4), the relevant amount, in relation to a chargeable period, is the amount of the annual personal allowance for persons born after 5 April 1948 (see section 35 of ITA 2007) for—

(a) the tax year which begins in the chargeable period, or

(b) if no tax year begins in the chargeable period, the tax year which is current when the chargeable period begins.

(6) But, if the chargeable period is less than 12 months, the relevant amount is—

where—

P is the number of days in the chargeable period;
A is the amount determined under subsection (5) in relation to the chargeable period.

(7) If, during the chargeable period, an individual ceases to be a qualifying member of the independent community or a constituent community (otherwise than on death), the relevant amount, in relation to the chargeable period and that qualifying member, is—

where—

Q is the number of days in the chargeable period for which the individual is a qualifying member of the independent community or constituent community;
P is the number of days in the chargeable period;
B is the amount determined under subsection (5), or subsections (5) and (6), in relation to the chargeable period.

(8) So far as the exemption from corporation tax conferred by this section calls for repayment of tax, no repayment shall be made except on a claim made by the independent community or parent body.

(9) In a case where a member of an independent community or constituent community—

(a) has transferred or covenanted income to the community (in the case of an independent community) or the parent body (in the case of a constituent community), and

(b) has income for a tax year which does not exceed 20% of the annual personal allowance for persons born after 5 April 1948 (see section 35 of ITA 2007) for that tax year,

the member is, for the purposes of this section, to be taken to have transferred or covenanted all his or her income for that tax year to the community or parent body.

(10) For the purposes of this section a contemplative religious community is a “qualifying” contemplative religious community if—

(a) the community is established in the United Kingdom,

(b) the members of the community live and practise their religion in a communal establishment, and

(c) the community is not a charity, but the religion that is professed by the members of the community does not prevent the community from being a charity.

(11) In this section—

“ member ”, in relation to a religious community, means an individual who—
(a)
is living in the community, and
(b)
has taken vows or made equivalent commitments (whether probationary or not);
“ qualifying member ”, in relation to a religious community, means a member of the community who—
(a)
has been a member of the community for a period of at least six months, and
(b)
has transferred all his or her income and assets, or covenanted all his or her income, to the community (in the case of an independent community) or the parent body (in the case of a constituent community).

508B Contemplative religious communities: gains exempt from corporation tax

(1) Subsection (2) applies if, as respects a chargeable period—

(a) section 508A(2) applies in relation to an independent community,

(b) the profits of the independent community in the chargeable period are less than the total of the amounts that fall to be treated as income of the qualifying members of the community in accordance with section 508A(2), and

(2) As respects the chargeable period and each qualifying member of the independent community, the community shall be treated for the purposes of corporation tax as if the relevant amount of its chargeable gains for that period were income of the qualifying member.

(3) Subsection (4) applies if, as respects a chargeable period—

(a) section 508A(4) applies in relation to a parent body,

(b) the profits of the parent body in the chargeable period are less than the total of the amounts that fall to be treated as income of the qualifying members of the constituent communities in accordance with section 508A(4), and

(4) As respects the chargeable period and each qualifying member of a constituent community, the parent body shall be treated for the purposes of corporation tax as if the relevant amount of its chargeable gains for that period were income of the qualifying member.

(5) For the purposes of subsections (2) and (4), the relevant amount, in relation to a qualifying member of the independent community or a constituent community, is the smaller of—

(a) the shortfall in profits, and

(b) the average gain.

(6) The shortfall in profits is the difference between—

(a) the relevant amount determined under section 508A(5) to (7) in relation to the qualifying member, and

(b) the amount that has actually been treated as the income of the qualifying member.

(7) The average gain is—

where—

G is the amount of the chargeable gains which the independent community or parent body has in the chargeable period;
N is the number calculated by adding together the relevant value for each qualifying member of the independent community or constituent communities who, under section 508A(2) or (4), falls to be treated as having income.

(8) For the purposes of calculating “N” in subsection (7)—

(a) the relevant value for a qualifying member is 1;

(b) but, if section 508A(7) applies in relation to the qualifying member, the relevant value for that member is—

where Q and P have the same meanings as in section 508A(7).

(9) So far as the exemption from corporation tax conferred by this section calls for repayment of tax, no repayment shall be made except on a claim made by the independent community or parent body.

509 Reserves of marketing boards and certain other statutory bodies.

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510 Agricultural societies.

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510A European economic interest groupings.

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511 The Electricity Council and Boards, the Northern Ireland Electricity Service and the Gas Council.

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

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

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

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

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

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

512 Atomic Energy Authority and National Radiological Protection Board.

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513 British Airways Board and National Freight Corporation.

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514 Funds for reducing the National Debt.

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515 Signatories to Operating Agreement for INMARSAT.

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516 Government securities held by non-resident central banks.

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517 Issue departments of the Reserve Bank of India and the State Bank of Pakistan.

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518 Harbour reorganisation schemes.

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519 Local authorities.

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519A Health service bodies.

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PART XIII MISCELLANEOUS SPECIAL PROVISIONS

CHAPTER I INTELLECTUAL PROPERTY

Patents and know-how

520 Allowances for expenditure on purchase of patent rights: post-31st March 1986 expenditure.

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521 Provisions supplementary to section 520.

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522 Allowances for expenditure on purchase of patent rights: pre-1st April 1986 expenditure.

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523 Lapses of patent rights, sales etc.

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524 Taxation of receipts from sale of patent rights.

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525 Capital sums: . . . winding up or partnership change.

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526 Relief for expenses.

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527 Spreading of royalties over several years.

(1) Where—

(a) a royalty or other sum is paid to a company in respect of the user of a patent,

(b) the user extended over a period of six complete years or more, and

the company may on the making of a claim require that the corporation tax payable by it by reason of the receipt of that sum shall be reduced so as not to exceed the total amount of corporation tax which would have been payable by it if that royalty or sum had been paid in six equal instalments at yearly intervals, the last of which was paid on the date on which the payment was in fact made.

(2) Subsection (1) above shall apply in relation to a royalty or other sum where the period of the user is two complete years or more but less than six complete years as it applies to the royalties and sums mentioned in that subsection, but with the substitution for the reference to six equal instalments of a reference to so many equal instalments as there are complete years comprised in that period.

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

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

528 Manner of making allowances and charges.

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529 Patent income to be earned income in certain cases.

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530 Disposal of know-how.

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531 Provisions supplementary to section 530.

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532 Application of Capital Allowances Act

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533 Interpretation of sections 520 to 532.

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Copyright and public lending right

534 Relief for copyright payments etc.

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535 Relief where copyright sold after ten years or more.

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536 Taxation of royalties where owner abroad.

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537 Public lending right.

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Designs

537A Relief for payments in respect of designs.

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537B Taxation of design royalties where owner abroad.

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Artists’ receipts

538 Relief for painters, sculptors and other artists.

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CHAPTER II LIFE POLICIES, LIFE ANNUITIES AND CAPITAL REDEMPTION POLICIES

539 Introductory.

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539ZA Application of this Chapter etc. to policies and contracts in which persons other than companies are interested

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539A The conditions for being an excepted group life policy

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540 Life policies: chargeable events.

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541 Life policies: computation of gain.

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542 Life annuity contracts: chargeable events.

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543 Life annuity contracts: computation of gain.

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544 Second and subsequent assignment of life policies and contracts.

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545 Capital redemption policies.

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546 Calculation of certain amounts for purposes of sections 540, 542 and 545.

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546A Treatment of certain assignments etc involving co-ownership

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546B Special provision in respect of certain section 546 excesses

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546C Charging the section 546 excess to tax where section 546B applies

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546D Modifications of s.546C for final year ending with terminal chargeable event

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547 Method of charging gain to tax.

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547A Method of charging gain to tax: multiple interests.

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548 Deemed surrender of certain loans.

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548A Effect of rebated or reinvested commission in certain cases

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548B Section 548A: further definitions

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549 Certain deficiencies allowable as deductions.

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550 Relief where gain charged at a higher rate.

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551 Right of individual to recover tax from trustees.

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551A Right of company to recover tax from trustees.

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552 Information: duty of insurers.

(1) Where a chargeable event . . . has happened in relation to any policy or contract, the body by or with whom the policy or contract was issued, entered into or effected shall—

(a) unless satisfied that no gain is to be treated as arising by reason of the event, deliver to the appropriate policy holder before the end of the relevant three month period a certificate specifying the information described in subsection (5) below; and

(b) if the condition in paragraph (a) or (b) of subsection (2) below is satisfied, deliver to the inspector before the end of the relevant three month period a certificate specifying the information described in subsection (5) below together with the name and address of the appropriate policy holder.

(2) For the purposes of this section—

(a) the condition in this paragraph is that the event is an assignment for money or money’s worth of the whole of the rights conferred by the policy or contract; or

(b) the condition in this paragraph is that the amount of the gain, or the aggregate amount of the gain and any gains connected with it, exceeds one half of the basic rate limit for the relevant year of assessment.

(3) If, in the case of every certificate which a body delivers under subsection (1)(a) above which relates to a gain attributable to a year of assessment . . . , the body also delivers to the inspector—

(a) before the end of the relevant three month period for the purposes of subsection (1)(b) above,

(b) by a means prescribed by the Board for the purposes of this subsection under section 552ZA(5), and

a certificate specifying the same information as the certificate under subsection (1)(a) together with the name and address of the appropriate policy holder, the body shall be taken to have complied with the requirements of subsection (1)(b) above in relation to that year of assessment . . . so far as relating to the chargeable events to which the certificates relate.

(4) Where a certificate is not required to be delivered under subsection (1)(b) above in the case of any chargeable event—

(a) the inspector may by notice require the body to deliver to him a copy of any certificate that the body was required to deliver under subsection (1)(a) above which relates to the chargeable event; and

(b) it shall be the duty of the body to deliver such a copy within 30 days of receipt of the notice.

(5) The information to be given to the appropriate policy holder pursuant to subsection (1)(a) above or the inspector pursuant to subsection (1)(b) above is—

(a) any unique identifying designation given to the policy or contract;

(b) the nature of the chargeable event and—

(i) the date on which it happened; and

(ii) if it is a chargeable event by virtue of . . . section 514(1) of ITTOIA 2005 (chargeable events where transaction-related calculations show gains), the date on which the insurance year ends ;

(c) if the event is the assignment of all the rights conferred by the policy or contract, such of the following as may be required for computing the amount of the gain to be treated as arising by virtue of . . . Chapter 9 of Part 4 of ITTOIA 2005 —

(i) . . . the amount or value of any capital sums of a kind referred to in section 492(1)(b) to (e) of ITTOIA 2005 ;

(ii) the amounts previously paid under the policy or contract by way of premiums or otherwise by way of consideration for an annuity;

(iii) . . . the amount of so much of any payment previously made on account of an annuity as is exempt under section 717 of ITTOIA 2005 ;

(iv) the value of any previously assigned parts of or shares in the rights conferred by the policy or contract;

(v) . . . the total of the amounts of gains treated as arising on previous chargeable events within section 509(1) or 514(1) of ITTOIA 2005 ;

(d) except where paragraph (c) above applies, the amount of the gain treated as arising by reason of the event;

(e) the number of years relevant for computing the annual equivalent of the amount of the gain for the purposes of subsection (1) of section 536 of ITTOIA 2005 (top slicing relieved liability: one chargeable event), apart from subsections (6) and (8) of that section;

(f) on the assumption that section 465 of ITTOIA 2005 (person liable: individuals) has effect in relation to the gain —

(i) whether an individual would fall to be treated as having paid income tax at the basic rate on the amount of the gain in accordance with section 530 of that Act; and

(ii) if so, except in a case where paragraph (c) above applies, the amount of such tax that would fall to be so treated as paid.

(6) For the purposes of subsection (1)(a) above, the relevant three month period is whichever of the following periods ends the latest—

(a) the period of three months following the happening of the chargeable event;

(b) if the event is a surrender or assignment which is a chargeable event by virtue of . . . section 514(1) of ITTOIA 2005 . . . , the period of three months following the end of the insurance year in which the event happens;

(c) if the event is a death or an assignment of the whole of the rights or a surrender or assignment which is a chargeable event by virtue of . . . section 514(1) of ITTOIA 2005 . . . , the period of three months beginning with receipt of written notification of the event.

(7) For the purposes of subsection (1)(b) above, the relevant three month period is whichever of the following periods ends the latest—

(a) the period of three months following the end of the year of assessment . . . in which the event happened;

(b) if the event is a surrender or assignment which is a chargeable event by virtue of section 514(1) of ITTOIA 2005, the period of three months following the end of the insurance year in which the event happens;

(c) if the event is a death or an assignment, the period of three months beginning with receipt of written notification of the event;

(d) if a certificate under subsection (1)(b) above would not be required in respect of the event apart from the happening of another event, and that other event is one of those mentioned in paragraph (c) above, the period of three months beginning with receipt of written notification of that other event.

(8) For the purposes of this section the cases where a gain is connected with another gain are those cases where—

(a) both gains arise in connection with policies or contracts containing obligations which, immediately before the chargeable event, were obligations of the same body;

(b) the policy holder of those policies or contracts is the same;

(d) the terms of the policies or contracts are the same, apart from any difference in their maturity dates; and

(e) the policies or contracts were issued in respect of insurances made, or were entered into or effected, on the same date.

(9) For the purposes of this section, the year of assessment . . . to which a gain is attributable is—

(a) in the case of a gain treated as arising by virtue of subsection (1) of section 514 of ITTOIA 2005, the year of assessment which includes the end of the insurance year mentioned in subsection (3) and (4) of that section; or

(b) in any other case, the year of assessment . . . in which happens the chargeable event by reason of which the gain is treated as arising.

(10) In this section—

“ amount ”, in relation to any gain, means the amount of the gain apart from . . . section 528 of ITTOIA 2005 ;
“ appropriate policy holder ” means—
(a)
in relation to an assignment of part of or a share in the rights conferred by a policy or contract, any person who is both—
(i)
the policy holder, or one of the policy holders, immediately before the assignment; and
(ii)
the assignor or one of the assignors; and
(b)
in relation to any other chargeable event, the person who is the policy holder immediately before the happening of the event;
“ chargeable event ” means an event which is a chargeable event within the meaning of . . . Chapter 9 of Part 4 of ITTOIA 2005;
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“ insurance year ” has the same meaning as in Chapter 9 of Part 4 of ITTOIA 2005 (see section 499 of that Act);
“ the relevant year of assessment ”, in the case of any gain, means—
(a)
the year of assessment to which the gain is attributable, . . .
(b)
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(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12) This section is supplemented by section 552ZA.

(13) For the purposes of this section—

(a) section 491(2) of ITTOIA 2005 is taken to have effect as if, in the definition of “PG”, the words from “but” to the end were omitted, and

(b) no account is to be taken of the effect of section 465B or 541A of that Act.

(14) For the purposes of this section no account is to be taken of the effect of sections 528 and 528A of ITTOIA 2005.

552ZA Information: supplementary provisions

(1) This section supplements section 552 and shall be construed as one with it.

(2) Where the obligations under any policy or contract of the body that issued, entered into or effected it (“ the original insurer ”) are at any time the obligations of another body (“ the transferee ”) to whom there has been a transfer of the whole or any part of a business previously carried on by the original insurer, section 552 shall have effect in relation to that time, except where the chargeable event—

(a) happened before the transfer, and

(b) in the case of a death or an assignment, is an event of which the notification mentioned in subsection (6) or (7) of that section was given before the transfer,

as if the policy or contract had been issued, entered into or effected by the transferee.

(3) Where, in consequence of . . . section 514(1) of ITTOIA 2005 , paragraph (a) or (b) of section 552(1) requires certificates to be delivered in respect of two or more surrenders, happening in the same year, of part of or a share in the rights conferred by the policy or contract, a single certificate may be delivered under the paragraph in question in respect of all those surrenders (and may treat them as if they together constituted a single surrender) unless between the happening of the first and the happening of the last of them there has been—

(a) an assignment of part of or a share in the rights conferred by the policy or contract; or

(b) an assignment, otherwise than for money or money’s worth, of the whole of the rights conferred by the policy or contract.

(4) Where the appropriate policy holder is two or more persons—

(a) section 552(1)(a) requires a certificate to be delivered to each of them; but

(b) nothing in section 552 or this section requires a body to deliver a certificate under subsection (1)(a) of that section to any person whose address has not been provided to the body (or to another body, at a time when the obligations under the policy or contract were obligations of that other body).

(5) A certificate under section 552(1)(b) or (3)—

(a) shall be in a form prescribed for the purpose by the Board; and

(b) shall be delivered by any means prescribed for the purpose by the Board;

and different forms, or different means of delivery, may be prescribed for different cases or different purposes.

(6) The Board may by regulations make such provision as they think fit for securing that they are able—

(a) to ascertain whether there has been or is likely to be any contravention of the requirements of section 552 or this section; and

(b) to verify any certificate under that section.

(7) Regulations under subsection (6) above may include, in particular, provisions requiring persons to whom premiums under any policy are or have at any time been payable—

(a) to supply information to the Board; and

(b) to make available books, documents and other records for inspection on behalf of the Board.

(8) Regulations under subsection (6) above may—

(a) make different provision for different cases; and

(b) contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.

552ZB Regulations in relation to qualifying policies

(1) The Commissioners for Her Majesty's Revenue and Customs may make regulations—

(a) requiring relevant persons—

(i) to provide prescribed information to persons who apply for the issue of qualifying policies or who are, or may be, required to make statements under paragraph B3(2) of Schedule 15;

(ii) to provide to an officer of Revenue and Customs prescribed information about qualifying policies which have been issued by them or in relation to which they are or have been a relevant transferee;

(b) making such provision (not falling within paragraph (a)) as the Commissioners think fit for securing that an officer of Revenue and Customs is able—

(i) to ascertain whether there has been or is likely to be any contravention of the requirements of the regulations or of paragraph B3(2) of Schedule 15;

(ii) to verify any information provided to an officer of Revenue and Customs as required by the regulations.

(2) The provision that may be made by virtue of subsection (1)(b) includes, in particular, provision requiring relevant persons to make available books, documents and other records for inspection by or on behalf of an officer of Revenue and Customs.

(3) The regulations may—

(a) make different provision for different cases or circumstances, and

(b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.

(4) In this section—

“ prescribed ” means prescribed by the regulations,
“ qualifying policy ” includes a policy which would be a qualifying policy apart from—
(a)
paragraph A1(2), B1(2), B2(2) or B3(3) of Schedule 15, or
(b)
paragraph 17(2)(za) of that Schedule (including as applied by paragraph 18), and
“ relevant person ” means a person—
(a)
who issues, or has issued, qualifying policies, or
(b)
who is, or has been, a relevant transferee in relation to qualifying policies.

(5) For the purposes of this section a person (“X”) is at any time a “ relevant transferee ” in relation to a qualifying policy if the obligations under the policy of its issuer are at that time the obligations of X as a result of there having been a transfer to X of the whole or any part of a business previously carried on by the issuer.

552A Tax representatives.

(1) This section has effect for the purpose of securing that, where it applies to an overseas insurer, another person is the overseas insurer’s tax representative.

(2) In this section “ overseas insurer ” means a person who is not resident in the United Kingdom who carries on a business which consists of or includes the effecting and carrying out of—

(a) policies of life insurance;

(b) contracts for life annuities; or

(3) This section applies to an overseas insurer—

(a) if the condition in subsection (4) below is satisfied on the designated day; or

(b) where that condition is not satisfied on that day, if it has subsequently become satisfied.

(4) The condition mentioned in subsection (3) above is that—

(a) there are in force relevant insurances the obligations under which are obligations of the overseas insurer in question or of an overseas insurer connected with him; and

(b) the total amount or value of the gross premiums paid under those relevant insurances is £1 million or more.

(5) In this section “ relevant insurance ” means any policy of life insurance, contract for a life annuity or capital redemption policy . . . in the case of which—

(a) the holder is resident in the United Kingdom;

(b) the obligations of the insurer are obligations of a person not resident in the United Kingdom; and

(6) Before the expiration of the period of three months following the day on which this section first applies to an overseas insurer, the overseas insurer must nominate to the Board a person to be his tax representative.

(7) A person shall not be a tax representative unless—

(a) if he is an individual, he is resident in the United Kingdom and has a fixed place of residence there, or

(b) if he is not an individual, he has a business establishment in the United Kingdom,

and, in either case, he satisfies such other requirements (if any) as are prescribed in regulations made for the purpose by the Board.

(8) A person shall not be an overseas insurer’s tax representative unless—

(a) his nomination by the overseas insurer has been approved by the Board; or

(b) he has been appointed by the Board.

(9) The Board may by regulations make provision supplementing this section; and the provision that may be made by any such regulations includes provision with respect to—

(a) the making of a nomination by an overseas insurer of a person to be his tax representative;

(b) the information which is to be provided in connection with such a nomination;

(d) the powers and duties of the Board in relation to such a nomination;

(e) the procedure for approving, or refusing to approve, such a nomination, and any time limits applicable to doing so;

(f) the termination, by the overseas insurer or the Board, of a person’s appointment as a tax representative;

(g) the appointment by the Board of a person as the tax representative of an overseas insurer (including the circumstances in which such an appointment may be made);

(h) the nomination by the overseas insurer, or the appointment by the Board, of a person to be the tax representative of an overseas insurer in place of a person ceasing to be his tax representative;

(j) circumstances in which an overseas insurer to whom this section applies may, with the Board’s agreement, be released (subject to any conditions imposed by the Board) from the requirement that there must be a tax representative;

(k) appeals to the tribunal against decisions of the Board under this section or regulations under it.

(10) The provision that may be made by regulations under subsection (9) above also includes provision for or in connection with the making of other arrangements between the Board and an overseas insurer for the purpose of securing the discharge by or on behalf of the overseas insurer of the relevant duties, within the meaning of section 552B.

(11) Section 1122 of CTA 2010 (connected persons) applies for the purposes of this section.

(12) In this section—

“ capital redemption policy ” means a capital redemption policy in relation to which . . . Chapter 9 of Part 4 of ITTOIA 2005 has effect;
“ contract for a life annuity ” means a contract for a life annuity in relation to which . . . Chapter 9 of Part 4 of ITTOIA 2005 has effect;
“ the designated day ” means such day as the Board may specify for the purpose in regulations;
“ policy of life insurance ” means a policy of life insurance in relation to which . . . Chapter 9 of Part 4 of ITTOIA 2005 has effect;
“ tax representative ” means a tax representative under this section.

552B Duties of overseas insurers’ tax representatives.

(1) It shall be the duty of an overseas insurer’s tax representative to secure (where appropriate by acting on the overseas insurer’s behalf) that the relevant duties are discharged by or on behalf of the overseas insurer.

(2) For the purposes of this section “ the relevant duties ” are—

(a) the duties imposed by section 552,

(b) the duties imposed by section 552ZA(2), (4) or (5), . . .

(c) any duties imposed by regulations made under subsection (6) of section 552ZA by virtue of subsection (7) of that section, and

(d) any duties imposed by regulations under section 552ZB,

so far as relating to relevant insurances under which the overseas insurer in question has any obligations.

(3) An overseas insurer’s tax representative shall be personally liable—

(a) in respect of any failure to secure the discharge of the relevant duties, and

(b) in respect of anything done for purposes connected with acting on the overseas insurer’s behalf,

as if the relevant duties were imposed jointly and severally on the tax representative and the overseas insurer.

(4) In the application of this section in relation to any particular tax representative, it is immaterial whether any particular relevant duty arose before or after his appointment.

(5) This section has effect in relation to relevant duties relating to chargeable events happening on or after the day by which section 552A(6) requires the nomination of the overseas insurer’s first tax representative to be made.

(5A) In subsection (5) “ chargeable event ” has the same meaning as in section 552 (see subsection (10) of that section).

(6) Expressions used in this section and in section 552A have the same meaning in this section as they have in that section.

553 Non-resident policies and off-shore capital redemption policies.

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553A Overseas life assurance business: life policies.

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553B Overseas life assurance business: capital redemption policies.

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553C Personal portfolio bonds.

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554 Borrowings on life policies to be treated as income in certain cases.

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CHAPTER III ENTERTAINERS AND SPORTSMEN

555 Payment of tax.

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556 Activity treated as trade etc. and attribution of income.

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557 Charge on profits .

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558 Supplementary provisions.

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

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

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

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

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

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER IV SUB-CONTRACTORS IN THE CONSTRUCTION INDUSTRY

559 Deductions on account of tax etc. from payments to certain sub-contractors.

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559A Treatment of sums deducted under s.559

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560 Persons who are sub-contractors or contractors for purposes of Chapter IV.

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561 Exceptions from section 559.

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562 Conditions to be satisfied by individuals.

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563 Conditions to be satisfied by partners who are individuals.

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564 Conditions to be satisfied by firms.

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565 Conditions to be satisfied by companies.

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566 General powers to make regulations under Chapter IV.

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567 Meaning of “construction operations”.

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CHAPTER V SCHEMES FOR RATIONALIZING INDUSTRY

568 Deductions from profits of contributions paid under certified schemes.

(1) Notwithstanding anything contained in . . . section 33 of ITTOIA 2005 or section 53 of CTA 2009 (no deduction for capital expenditure) but subject to the following provisions of this Chapter, where a person pays, wholly and exclusively for the purposes of a trade in respect of which he is chargeable under Part 2 of ITTOIA 2005 or Part 3 of CTA 2009, a contribution in furtherance of a scheme which is for the time being certified by the Secretary of State under this section, the contribution shall, in so far as it is paid in furtherance of the primary object of the scheme, be allowed to be deducted as an expense in computing the profits of that trade.

(2) The Secretary of State shall certify a scheme under this section if he is satisfied—

(a) that the primary object of the scheme is the elimination of redundant works or machinery or plant from use in an industry in the United Kingdom; and

(b) that the scheme is in the national interest and in the interests of that industry as a whole; and

(c) that such number of persons engaged in that industry as are substantially representative of the industry are liable to pay contributions in furtherance of the primary object of the scheme by agreement between them and the body of persons carrying out the scheme.

References in this subsection to an industry in the United Kingdom shall include references to the business carried on by owners of ships or of a particular class of ships, wherever that business is carried on, and, in relation to that business, references in this subsection to works or machinery or plant shall include references to ships.

(3) The Secretary of State shall cancel any certificate granted under this section if he ceases to be satisfied as to any of the matters referred to in subsection (2) above.

(4) The Secretary of State may at any time require the body of persons carrying out a scheme certified under this section to produce any books or documents of whatever nature relating to the scheme and, if the requirement is not complied with, he may cancel the certificate.

(5) In this section and in section 569 “ contribution ”, in relation to a scheme, does not include a sum paid by a person by way of loan or subscription of share capital, or in consideration of the transfer of assets to him, or by way of a penalty for contravening or failing to comply with the scheme.

569 Repayment of contributions.

(1) In the event of the repayment, whether directly or by way of distribution of assets on a winding up or otherwise, of a contribution or any part of a contribution which has been allowed to be deducted under section 568, the deduction of the contribution, or so much of it as has been repaid, shall be deemed to be an unauthorised deduction in respect of which an assessment shall be made, and, notwithstanding the provisions of the Tax Acts requiring assessments to be made within six years after the end of the chargeable period to which they relate, any such assessment and any consequential assessment may be made at any time within three years after the end of the chargeable period in which the repayment was made.

(2) For the purposes of this section, a sum received by any person by way of repayment of contributions shall be deemed to be by way of repayment of the last contribution paid by him, and, if the sum exceeds the amount of that contribution, by way of repayment of the penultimate contribution so paid, and so on.

570 Payments under certified schemes which are not repayments of contributions.

(1) Subject to the provisions of this section, where, under any scheme which is for the time being certified or has at any time been certified by the Secretary of State under section 568, any payment (not being a payment made by way of repayment of contributions) is made to a person carrying on a trade to which the scheme relates, that payment shall be treated for the purposes of the Tax Acts as a trading receipt of the trade, and shall accordingly be taken into account in computing the profits of the trade for those purposes.

(2) Where . . . the payments which have been made under such a scheme in respect of a trade (not being payments made by way of repayment of contributions) have been made wholly or partly in respect of damage in respect of which no relief may be given under the Tax Acts, and a claim is made to that effect, then, subject to and in accordance with the provisions of Schedule 21 —

(a) relief shall be given in respect of those payments by reducing the amounts which are to be treated as trading receipts of the trade under subsection (1) above; but

(b) where such relief is given, section 568 shall, in relation to contributions subsequently paid under the scheme in respect of the trade, have effect subject to the modifications specified in Part III of that Schedule,

and paragraph 6 of that Schedule applies for the purposes of this subsection as it applies for the purposes of that Schedule.

(3) The provisions of this section and Schedule 21 shall apply in relation to any payment made to a person who has ceased to carry on a trade to which any such scheme as is mentioned in subsection (1) above relates as they apply in relation to payments made to a person carrying on such a trade, subject to the modification that so much of that payment as falls to be treated as a trading receipt by virtue of those provisions shall be deemed for the purposes of those provisions to have been made to him on the last day on which he was engaged in carrying on the trade.

(4) In determining for the purposes of this section and of Schedule 21—

(a) whether any trade has ceased to be carried on; or

(b) whether any contribution is paid in respect of a trade in respect of which a payment has been made; or

no regard shall be had to any event which, by virtue of section 18 of ITTOIA 2005 or section 41 of CTA 2009 (company starting or ceasing to be within charge to corporation tax) is to be treated as effecting a cessation of trading.

571 Cancellation of certificates.

(1) Where any certificate granted with respect to a scheme under section 568 is cancelled by the Secretary of State, and any deductible contributions paid in furtherance of the scheme have not been repaid at the expiration of one year from the cancellation, the body of persons carrying out the scheme shall, for the chargeable period in which that year expires, be charged to tax . . . upon the aggregate amount of the deductible contributions which have not been repaid at that time.

(1A) An amount charged to income tax under subsection (1) above is treated for income tax purposes as an amount of income.

(1B) So far as relating to corporation tax, the charge to tax under subsection (1) has effect as an application of the charge to corporation tax on income.

(2) The charge to tax under subsection (1) above shall not be made if the total amount of any contributions, other than deductible contributions, which have been paid under the scheme and have not been repaid before that time is greater than the available resources of the scheme, and shall not in any case be made upon an amount greater than the excess, if any, of those resources over that total amount.

(3) In subsection (2) above “ the available resources ”, in relation to any scheme, means a sum representing the total funds held for the purposes of the scheme at the expiration of one year from the cancellation of the certificate plus a sum representing any funds held for the purposes of the scheme which, during that year, have been applied otherwise than in accordance with the provisions of the scheme as in force when the certificate was granted.

(4) Where the body of persons carrying out a scheme are charged to tax by virtue of subsection (1) above, and, after the expiration of one year from the cancellation of the certificate, any deductible contribution paid in furtherance of the scheme is repaid, the amount upon which the charge is made shall on the making of a claim be reduced by the amount repaid, and all such repayments of tax shall be made as are necessary to give effect to the provisions of this subsection.

(5) In this section “ contribution ” includes a part of a contribution, and “ deductible contribution ” means a contribution allowed to be deducted under section 568, any reduction under Part III of Schedule 21 being left out of account.

(6) For the purposes of this section, a sum received by any person by way of repayment of contributions shall be deemed to be by way of repayment of the last contribution paid by him, and, if the sum exceeds the amount of that contribution, by way of repayment of the penultimate contribution so paid, and so on.

572 Application to statutory redundancy schemes.

(1) Sections 569 to 571 and Schedule 21 shall, subject to the adaptations specified in subsection (2) below, apply in relation to a statutory redundancy scheme as they apply in relation to a scheme certified under section 568.

(2) The adaptations referred to above are as follows, that is to say—

(a) for any reference to a contribution allowed to be deducted under section 568 there shall be substituted a reference to a contribution allowed to be deducted under any provision of the Tax Acts other than that section;

(b) any provision that section 568 shall, in relation to contributions, have effect subject to modifications, shall be construed as a provision that so much of any provision of the Tax Acts other than that section as authorises the deduction of contributions shall, in relation to the contributions in question, have effect subject to the modifications in question;

(c) for any reference to the cancellation of a certificate with respect to a scheme there shall be substituted a reference to the scheme ceasing to have effect; and

(d) for any reference to the provisions of the scheme as in force when the certificate was granted there shall be substituted a reference to the provisions of the scheme as in force when the contributions were first paid thereunder.

(3) In this section “ statutory redundancy scheme ” means a scheme for the elimination or reduction of redundant works, machinery or plant, or for other similar purposes, to which effect is given by or under any Act, whether passed before or after this Act.

Chapter 5A Share loss relief

Relief for losses on unquoted shares in trading companies

573 Relief for companies.

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575 Exclusion of relief under section 573 . . . in certain cases.

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576 Provisions supplementary to sections 573 and 575 .

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576A Qualifying trading companies

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Qualifying trading companies: the requirements

576B The trading requirement

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576C Ceasing to meet the trading requirement because of administration or receivership

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576D The control and independence requirement

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576E The qualifying subsidiaries requirement

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576F The property managing subsidiaries requirement

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576G The gross assets requirement

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576H The unquoted status requirement

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576I Power to amend requirements by Treasury order

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Qualifying trading companies: supplementary provisions

576J Relief after an exchange of shares for shares in another company

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576K Substitution of new shares for old shares

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Supplemental

576L Interpretation of Chapter

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CHAPTER VI OTHER PROVISIONS

Relief for losses on unquoted shares in trading companies

574 Relief for individuals.

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Miscellaneous

577 Business entertaining expenses.

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577A Expenditure involving crime.

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578 Housing grants.

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578A Expenditure on car hire

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578B Expenditure on car hire: supplementary

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579 Statutory redundancy payments.

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580 Provisions supplementary to section 579.

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580A Relief from tax on annual payments under certain insurance policies.

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580B Meaning of “self-contained” for the purposes of s.580A.

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580C Relief from tax on annual payments under immediate needs annuities

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581 Borrowing in foreign currency by local authorities and statutory corporations.

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581A Interest on foreign currency securities etc.

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582 Funding bonds issued in respect of interest on certain debts.

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582A Designated international organisations: miscellaneous exemptions.

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583 Inter-American Development Bank.

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584 Relief for unremittable overseas income

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585 Relief from tax on delayed remittances.

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586 Disallowance of deductions for war risk premiums.

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587 Disallowance of certain payments in respect of war injuries to employees.

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587A New issues of securities: extra return.

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587B Gifts of shares, securities and real property to charities etc

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587BA Qualifying interests in land held jointly

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587C Supplementary provision for gifts of real property

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588 Training courses for employees.

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589 Qualifying courses of training etc.

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589A Counselling services for employees.

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589B Qualifying counselling services etc.

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

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

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

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

(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

CHAPTER I RETIREMENT BENEFIT SCHEMES

Approval of schemes

590 Conditions for approval of retirement benefit schemes.

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590A Section 590: supplementary provisions.

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590B Section 590: further supplementary provisions.

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590C Earnings cap.

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591 Discretionary approval.

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591A Effect on approved schemes of regulations under section 591.

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591B Cessation of approval: general provisions.

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591C Cessation of approval: tax on certain schemes.

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591D Section 591C: supplementary.

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Tax reliefs

592 Exempt approved schemes.

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593 Relief by way of deductions from contributions.

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594 Exempt statutory schemes.

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Charge to tax in certain cases

595 Charge to tax in respect of certain sums paid by employer etc.

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596 Exceptions from section 595.

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

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596B Section 596A: supplementary provisions.

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

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597 Charge to tax: pensions.

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598 Charge to tax: repayment of employee’s contributions.

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599 Charge to tax: commutation of entire pension in special circumstances.

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

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600 Charge to tax: unauthorised payments to or for employees.

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601 Charge to tax: payments to employers.

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602 Regulations relating to pension fund surpluses.

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603 Reduction of surpluses.

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Supplementary provisions

604 Application for approval of a scheme.

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605 Information.

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605A False statements etc.

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606 Default of administrator etc.

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606A Recourse to scheme members.

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607 Pilots’ benefit fund.

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608 Superannuation funds approved before 6th April 1980.

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609 Schemes approved before 23rd July 1987.

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610 Amendments of schemes.

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611 Definition of “retirement benefits scheme”.

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611A Definition of relevant statutory scheme.

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611AA Definition of the administrator.

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611A Definition of relevant statutory scheme.

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612 Other interpretative provisions, and regulations for purposes of this Chapter.

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613 Parliamentary pension funds.

(1) The salary of a Member of the House of Commons shall, for all the purposes of the Income Tax Acts, be treated as reduced by the amounts deducted in pursuance of section 4 of the House of Commons Members' Fund Act 2016 ; but a Member shall not by reason of any such deduction be entitled to relief under any other provision of the Income Tax Acts.

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

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

(4) The . . . trustees of—

(a) the House of Commons Members’ Fund specified in section 1 of the 2016 Act ;

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

(bb) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

shall be entitled to exemption from income tax in respect of all income derived from that Fund or any investment of that Fund .

A claim under this subsection shall be made to the Board.

614 Exemptions and reliefs in respect of income from investments etc. of certain pension schemes.

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

(2) Any interest or dividends received by the person in whom is vested any of the Family Pension Funds mentioned in section 273 of the Government of India Act 1935, and having effect as a scheme made under section 2 of the Overseas Pensions Act 1973, on sums forming part of that fund shall be exempt from income tax.

(2A) The reference in subsection (2) above to interest on sums forming part of a fund include references to any amount which is treated as income by virtue of Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) and derives from any investment forming part of that fund.

(3) Income derived from investments or deposits of any fund referred to in section 648, 649, 650 or 651 of ITEPA 2003 shall not be charged to income tax, and any income tax deducted from any such income shall be repaid by the Board to the persons entitled to receive the income.

(4) In respect of income derived from investments or deposits of the Overseas Service Pensions Fund established pursuant to section 7(1) of the Overseas Aid Act 1966, the Board shall give by way of repayment such relief from income tax as is necessary to secure that the income is exempt to the like extent (if any) as if it were income of a person not domiciled and not resident in the United Kingdom.

(5) In respect of dividends and other income derived from investments, deposits or other property of a superannuation fund to which section 615(3) applies the Board shall give by way of repayment such relief from income tax as is necessary to secure that the income is exempt to the like extent (if any) as if it were income of a person not domiciled and not resident in the United Kingdom.

(6) A claim under this section shall be made to the Board.

615 Exemption from tax in respect of certain pensions.

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

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

(3) Where an annuity is paid from a superannuation fund to which this subsection applies to a person who is not resident in the United Kingdom, income tax shall not be deducted from any payment of the annuity or accounted for under Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments and patent royalties) by the trustees or other persons having the control of the fund.

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

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

(6) Subsection (3) above applies to any superannuation fund which—

(a) is bona fide established under irrevocable trusts in connection with some trade or undertaking carried on wholly or partly outside the United Kingdom;

(b) has for its sole purpose (subject to any enactment or Northern Ireland legislation requiring or allowing provision for the value of any rights to be transferred between schemes or between members of the same scheme) the provision of superannuation benefits in respect of persons’ employment in the trade or undertaking wholly outside the United Kingdom; . . .

(d) meets the benefit accrual condition (see subsection (6A));

and for the purposes of this subsection duties performed in the United Kingdom the performance of which is merely incidental to the performance of other duties outside the United Kingdom shall be treated as performed outside the United Kingdom .

(6A) The benefit accrual condition is—

(a) that, in the case of any money purchase arrangement relating to a member of the fund that is not a cash balance arrangement, no contributions are made under the arrangement on or after 6 April 2017;

(b) that, in the case of any cash balance arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person's rights under the arrangement;

(c) that, in the case of any defined benefits arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person's rights under the arrangement; and

(d) that, in the case of any arrangement relating to a member of the fund that is neither a money purchase arrangement nor a defined benefits arrangement—

(i) no contributions are made under the arrangement on or after 6 April 2017, and

(ii) there is no increase on or after 6 April 2017 in the value of any person's rights under the arrangement.

(6B) For the purposes of subsection (6A)(b)—

(a) whether there is an increase in the value of a person's rights is to be determined by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits under the arrangement to or in respect of the person (and, if there is, the amount of the increase), but

(b) in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.

(6C) For the purposes of subsection (6A)(c)—

(a) whether there is an increase in the value of a person's rights is to be determined by reference to whether there is an increase in the benefits amount as defined by paragraph 14(7) of Schedule 18 to the Finance Act 2011, but

(b) in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.

(6D) For the purposes of subsection (6A)(d)(ii), regulations made by the Commissioners for Her Majesty's Revenue and Customs may make provision—

(a) for determining whether there is an increase in the value of a person's rights,

(b) for determining the amount of any increase, and

and regulations under this subsection may make provision having effect in relation to times before the regulations are made.

(6E) In this section, “ relevant percentage ”, in relation to a tax year, means—

(a) where, on 20 March 2017, the rules of the fund include provision for the value of the rights of a person to increase during the tax year at an annual rate specified in those rules, that rate, or

(b) in any other case, the percentage by which the consumer prices index for September in the previous tax year is higher than it was for the September in the tax year before that (or, if greater, 0%).

(6F) The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision—

(a) so as to change, or modify the effect of, the benefit accrual condition;

(b) as to the matters to be taken into account in determining whether the benefit accrual condition is met;

(6G) Provision under subsection (6D) or (6F) may be made by amending this section.

(7) For the purposes of this section—

“ arrangement ”, in relation to a member of a superannuation fund, means an arrangement relating to the member under the fund;
a money purchase arrangement relating to a member of a superannuation fund is a “cash balance arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are cash balance benefits;
an arrangement relating to a member of a superannuation fund is a “defined benefits arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are defined benefits;
an arrangement relating to a member of a superannuation fund is a “money purchase arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are money purchase benefits;
“cash balance benefits”, “defined benefits” and “money purchase benefits” have the meaning given by section 152 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;
“ member ”, in relation to a superannuation fund, has the meaning given by section 151 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;
“ pension ” includes a gratuity or any sum payable on or in respect of death or, in the case of a pension falling within subsection (2)(g) above, ill-health, and a return of contributions with or without interest thereon or any other addition thereto;
“ overseas territory ” means any territory or country outside the United Kingdom;
“ the Pensions (Increase) Acts ” means the Pensions (Increase) Act 1971 and any Act passed after that Act for purposes corresponding to the purposes of that Act;
“ United Kingdom trust territory ” means a territory administered by the government of the United Kingdom under the trusteeship system of the United Nations;
“ the valuation assumptions ” has the meaning given by section 277 of the Finance Act 2004.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) For the purposes of this section, a person shall be taken to be employed in the public service of an overseas territory at any time when—

(a) he is employed in any capacity under the government of that territory, or under any municipal or other local authority in it,

(b) he is employed, in circumstances not falling within paragraph (a) above, by a body corporate established for any public purpose in that territory by an enactment of a legislature empowered to make laws for that territory, or

(c) he is the holder of a public office in that territory in circumstances not falling within either paragraph (a) or (b).

(10) For the purposes of subsection (9), references to the government of an overseas territory include references to a government constituted for two or more overseas territories, and to any authority established for the purpose of providing or administering services which are common to, or relate to matters of common interest to, two or more such territories.

(11) Where the conditions in subsection (6)(a) to (c) are met in the case of a superannuation fund (“ the actual fund ”)—

(a) any disqualifyingcontributions made under an arrangement relating to a member of the actual fund are treated for the purposes of the Income Tax Acts as instead made under an arrangement relating to the member under a separate superannuation fund (“the shadow fund” for the actual fund),

(b) any disqualifying increase in the value of a person's rights under an arrangement relating to a member of the actual fund is treated for the purposes of the Income Tax Acts as instead being an increase under an arrangement relating to the member under the shadow fund for the actual fund, and

(c) any reference in this or any other Act (including the reference in subsection (3) and any reference enacted after the coming into force of this subsection) to a fund, or superannuation fund, to which subsection (3) applies does not include so much of the actual fund as—

(i) represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the actual fund or the shadow fund of any other superannuation fund, or

(ii) arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.

(12) For the purposes of subsection (11) a contribution, or an increase in the value of any rights, is “disqualifying” if it would (ignoring that subsection) cause the benefit accrual condition not to be met in the case of the actual fund.

(13) For the purposes of the provisions of this section relating to the benefit accrual condition, where there is a recognised transfer—

(a) any transfer of sums or assets to the recipient fund by the recognised transfer is to be categorised as not being “a contribution” to the recipient fund, and

(b) any increase in the value of rights under the recipient fund that occurs at the time of the recognised transfer is to be treated as not being an increase in that value if the increase is solely a result of the transfer effected by the recognised transfer.

(14) For the purposes of subsection (13), where there is a transfer such that sums or assets held for the purposes of, or representing accrued rights under, an arrangement relating to a member of a superannuation fund (“ the transferor fund ”) are transferred so as to become held for the purposes of, or to represent rights under, an arrangement relating to that person as a member of another superannuation fund, the transfer is a “recognised transfer” if—

(a) the conditions in subsection (6)(a) to (c) are met in the case of each of the funds, and

(b) none of the sums and assets transferred—

(i) represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the transferor fund or the shadow fund of any other superannuation fund, or

(ii) arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.

616 Other overseas pensions.

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617 Social security benefits and contributions.

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617A Tax credits under Part 1 of Tax Credits Act 2002

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CHAPTER III RETIREMENT ANNUITIES

618 Termination of relief under this Chapter, and transitional provisions.

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619 Exemption from tax in respect of qualifying premiums.

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620 Qualifying premiums.

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621 Other approved contracts.

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622 Substituted retirement annuity contracts.

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623 Relevant earnings.

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624 Sponsored superannuation schemes and controlling directors.

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625 Carry-forward of unused relief under section 619.

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626 Modification of section 619 in relation to persons over 50.

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627 Lloyd’s underwriters.

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628 Partnership retirement annuities.

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629 Annuity premiums of Ministers and other officers.

(1) For the purposes of this Chapter so much of any salary which—

(a) is payable to the holder of a qualifying office who is also a Member of the House of Commons, and

(b) is payable for a period in respect of which the holder is not a participant in relation to that office in arrangements contained in the Parliamentary pension scheme but is a participant in relation to his membership of the House of Commons in any such arrangements, or for any part of such a period,

as is equal to the difference between a Member’s pensionable salary and the salary which (in accordance with any such resolution as is mentioned in subsection (3)(a) below) is payable to him as a Member holding that qualifying office shall be treated as remuneration from the office of Member and not from the qualifying office.

(2) In this section—

“ Member’s pensionable salary ” means a Member’s ordinary salary under any resolution of the House of Commons which, being framed otherwise than as an expression of opinion, is for the time being in force relating to the remuneration of Members or, if the resolution provides for a Member’s ordinary salary thereunder to be treated for pension purposes as being at a higher rate, a notional yearly salary at that higher rate;
“ qualifying office ” means an office mentioned in section 2(2)(b), (c) or (d) of the Parliamentary and other Pensions Act 1987;
“ the Parliamentary pension scheme ” has the same meaning as in that Act;

and without prejudice to the power conferred by virtue of paragraph 13 of Schedule 1 to that Act, regulations under section 2 of that Act may make provision specifying the circumstances in which a person is to be regarded for the purposes of this section as being or not being a participant in relation to his Membership of the House of Commons, or in relation to any office, in arrangements contained in the Parliamentary pension scheme.

(3) In subsection (2) above “ a Member’s ordinary salary ”, in relation to any resolution of the House of Commons, means—

(a) if the resolution provides for salary to be paid to Members at different rates according to whether or not they are holders of particular offices, or are in receipt of salaries or pensions as the holders or former holders of particular offices, a Member’s yearly salary at the higher or highest rate; and

(b) in any other case, a Member’s yearly salary at the rate specified in or determined under the resolution.

CHAPTER IV PERSONAL PENSION SCHEMES

Preliminary

630 Interpretation.

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631 Approval of schemes.

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631A Conversion of certain approved retirement benefits schemes.

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Restrictions on approval

632 Establishment of schemes.

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632A Eligibility to make contributions.

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632B Eligibility to make contributions: concurrent membership.

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633 Scope of benefits.

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634 Annuity to member.

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634A Income withdrawals by member.

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635 Lump sum to member.

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636 Annuity after death of member.

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636A Income withdrawals after death of member.

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637 Death benefit.

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637A Return of contributions on or after death of member.

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638 Other restrictions on approval.

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638ZA Personal pension arrangements with more than one pension date etc.

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638A Power to prescribe restrictions on approval.

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Tax reliefs

639 Member’s contributions.

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640 Maximum amount of deductions.

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640A Earnings cap.

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641 Carry-back of contributions.

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641A Election for contributions to be treated as paid in previous year.

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642 Carry-forward of relief.

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643 Employer’s contributions and personal pension income etc.

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644 Meaning of “relevant earnings”.

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645 Earnings from pensionable employment.

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646 Meaning of “net relevant earnings”.

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646A Earnings from associated employments.

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646B Presumption of same level of relevant earnings etc for 5 years.

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646C Provisions supplementary to section 646B.

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646D Higher level contributions after cessation of actual relevant earnings: modification of section 646B.

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Charge to tax

647 Unauthorised payments.

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648 Contributions under unapproved arrangements.

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648A Annuities: charge under Schedule E.

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648B Return of contributions after pension date.

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Miscellaneous

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650 Withdrawal of approval.

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650A Charge on withdrawal of approval from arrangements.

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651 Appeals.

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651A Information powers.

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652 Information about payments.

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653 Information: penalties.

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653A Notices to be given to scheme administrator.

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654 Remuneration of Ministers and other officers.

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655 Transitional provisions.

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CHAPTER V PURCHASED LIFE ANNUITIES

656 Purchased life annuities other than retirement annuities.

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657 Purchased life annuities to which section 656 applies.

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658 Supplementary.

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CHAPTER VI MISCELLANEOUS

658A Charges and assessments on administrators.

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659 Financial futures and traded options.

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659A Futures and options.

(1) For the purposes of sections . . . 613(4), 614(3) and (4) . . . —

(a) “ investments ” (or “ investment ”) includes futures contracts and options contracts, and

(b) income derived from transactions relating to such contracts shall be regarded as income derived from (or income from) such contracts.

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(2) For the purposes of subsection (1) above a contract is not prevented from being a futures contract or an options contract by the fact that any party is or may be entitled to receive or liable to make, or entitled to receive and liable to make, only a payment of a sum (as opposed to a transfer of assets other than money) in full settlement of all obligations.

659B Definition of insurance company.

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659C Effect of appointment or arrangements under section 659B.

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659E Treatment of income from property investment LLPs

(1) The exemptions specified below do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP (see section 1004 of ITA 2007) .

(2) The exemptions are those provided by—

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
section 613(4) (Parliamentary pension funds),
section 614(3) (certain colonial, &c. pension funds),
section 614(4) (the Overseas Service Pension Fund),
section 614(5) (other pension funds for overseas employees),
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(3) The income to which subsection (1) above applies includes relevant stock lending fees, in relation to any investments, to which any of the provisions listed in subsection (2) above would apply by virtue of section 129B.

(4) Section 659A (treatment of futures and options) applies for the purposes of subsection (1) above.

PART XV SETTLEMENTS

Chapter IA Liability of settlor

Main provisions

660A Income arising under settlement where settlor retains an interest.

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660B Payments to unmarried minor children of settlor.

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660C Nature of charge on settlor.

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

(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

660D Adjustments between settlor and trustees, &c.

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Supplementary provisions

660E Application to settlements by two or more settlors.

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660F Power to obtain information.

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CHAPTER I DISPOSITIONS FOR SHORT PERIODS

660 Dispositions for period which cannot exceed six years.

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661 Adjustments between disponor and trustees.

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662 Application of Chapter I to dispositions by two or more disponors.

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CHAPTER II SETTLEMENTS ON CHILDREN

663 The general rule.

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664 Accumulation settlements.

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665 Meaning of “irrevocable”.

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666 Interest paid by trustees.

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667 Adjustments between disponor and trustees.

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668 Application of Chapter II to settlements by two or more settlors.

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669 Power to obtain information under Chapter II.

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670 Interpretation of Chapter II.

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CHAPTER 1B PROVISIONS AS TO CAPITAL SUMS PAID TO SETTLOR

671 Revocable settlements allowing release of obligation.

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672 Revocable settlements allowing reversion of property.

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673 Settlements where settlor retains an interest.

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674 Settlements: discretionary power for benefit of settlor etc.

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674A Other settlements where settlor retains interest in settled property.

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675 Provisions supplementary to sections 671 to 674.

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676 Disallowance of deduction from total income of certain sums paid by settlor.

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677 Sums paid to settlor otherwise than as income.

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678 Capital sums paid by body connected with settlement.

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679 Application of Chapter III to settlements by two or more settlors.

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680 Power to obtain information for purposes of Chapter III.

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681 Interpretation of Chapter III.

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682 Ascertainment of undistributed income.

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682A Supplementary provisions.

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CHAPTER 1C LIABILITY OF TRUSTEES

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683 Settlements made after 6th April 1965.

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684 Settlements made before 7th April 1965 but after 9th April 1946.

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685 Provisions supplementary to sections 683 and 684.

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685A Meaning of “settled property”

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685B Meaning of “settlor”

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685C Transfer between settlements: identification of settlor

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685D Variation of will or intestacy, etc: identification of settlor

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685E Trustees of settlements

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685F Application of section 739 and 740

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685G Sub-funds

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686 Accumulation and discretionary trusts: special rates of tax.

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686A Receipts to be treated as income to which section 686 applies

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686B Share incentive plans: distributions in respect of unappropriated shares

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686C Interpretation of section 686B

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686D Special trust rates not to apply to first slice of trust income

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686E Application of section 686D where settlor has made more than one settlement

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687 Payments under discretionary trusts.

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687A Discretionary payments by trustees to companies .

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688 Schemes for employees and directors to acquire shares.

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689 Recovery from trustees of discretionary trusts of higher rate tax due from beneficiaries.

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Chapter ID Trust management expenses

689A Disregard of expenses where beneficiary non-resident.

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689B Order in which expenses to be set against income.

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CHAPTER V MAINTENANCE FUNDS FOR HISTORIC BUILDINGS

690 Schedule 4 directions.

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691 Certain income not to be income of settlor etc.

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692 Reimbursement of settlor.

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693 Severance of settled property for certain purposes.

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694 Trustees chargeable to income tax in certain cases at higher rate reduced by rate applicable to trusts

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PART XVI ESTATES OF DECEASED PERSONS IN COURSE OF ADMINISTRATION

695 Limited interests in residue.

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696 Absolute interests in residue.

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697 Supplementary provisions as to absolute interests in residue.

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698 Special provisions as to certain interests in residue.

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698A Taxation of income of beneficiaries at lower rate or at rates applicable to distribution income.

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699 Relief from higher rate tax for inheritance tax on accrued income.

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699A Untaxed sums comprised in the income of the estate.

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700 Adjustments and information.

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701 Interpretation.

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702 Application to Scotland.

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PART XVII TAX AVOIDANCE

CHAPTER I CANCELLATION OF CORPORATION TAX ADVANTAGES FROM CERTAIN TRANSACTIONS IN SECURITIES

703 Cancellation of corporation tax advantage.

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704 The prescribed circumstances.

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705 Appeals against Board’s notices under section 703.

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705A Statement of case by tribunal for opinion of High Court.

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705B Proceedings in Northern Ireland.

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706 The tribunal.

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707 Procedure for clearance in advance.

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708 Power to obtain information.

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709 Meaning of “corporation tax advantage” and other expressions.

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CHAPTER II TRANSFERS OF SECURITIES

Transfers with or without accrued interest: introductory

710 Meaning of “securities”, “transfer” etc. for purposes of sections 711 to 728.

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711 Meaning of “interest”, “transfers with or without accrued interest” etc.

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712 Meaning of “settlement day” for purposes of sections 711 to 728.

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Transfers with or without accrued interest: charge to tax and reliefs

713 Deemed sums and reliefs.

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714 Treatment of deemed sums and reliefs.

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715 Exceptions from sections 713 and 714

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716 Transfer of unrealised interest.

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717 Variable interest rate.

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718 Interest in default.

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719 Unrealised interest in default

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Transfers with or without accrued interest: supplemental

720 Nominees, trustees etc.

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721 Death.

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722 Trading stock.

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722A Gilt strips: deemed transfer.

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723 Foreign securities: delayed remittances

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724 Insurance companies.

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725 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

726 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

726A New issues of securities.

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727 Stock lending.

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727A Exception for sale and repurchase of securities.

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728 Information.

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Other transfers of securities

729 Sale and repurchase of securities.

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730 Transfers of rights to receive distributions in respect of shares

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730A Treatment of price differential on sale and repurchase of securities.

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730B Interpretation of section 730A.

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730BB Exchange gains and losses on sale and repurchase of securities

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730C Exchanges of gilts: traders etc.

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Purchase and sale of securities

731 Application and interpretation of sections 732 to 734.

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732 Dealers in securities.

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733 Persons entitled to exemptions.

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734 Persons other than dealers in securities.

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735 Meaning of “appropriate amount in respect of” interest.

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Miscellaneous provisions relating to securities

736 Company dealing in securities: distribution materially reducing value of holding.

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736A Manufactured dividends and interest.

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736B Deemed manufactured payments in the case of stock lending arrangements.

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736C Deemed interest: cash collateral under stock lending arrangements

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736D Quasi-stock lending arrangements and quasi-cash collateral

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737 Manufactured dividends: treatment of tax deducted.

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737A Sale and repurchase of securities: deemed manufactured payments.

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737B Interpretation of section 737A.

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737C Deemed manufactured payments: further provisions.

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Supplemental

737D Power to provide for manufactured payments to be eligible for relief.

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737E Power to modify sections . . . 730A, 730BB and 737A to 737C

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738 Power to amend sections 732, 735 and 737.

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CHAPTER III TRANSFER OF ASSETS ABROAD

739 Prevention of avoidance of income tax.

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740 Liability of non-transferors.

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

741 Exemption from sections 739 and 740 (transactions before 5th December 2005)

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741A Exemption from sections 739 and 740 (transactions on or after 5th December 2005)

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741B Application of sections 741 and 741A

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741C Cases where there are both old transactions and new transactions

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741D Section 739: just and reasonable apportionment in certain cases

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742 Interpretation of this Chapter

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743 Supplemental provisions.

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744 No duplication of charge.

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745 Power to obtain information.

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746 Persons resident in the Republic of Ireland.

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CHAPTER IV CONTROLLED FOREIGN COMPANIES

747 Imputation of chargeable profits and creditable tax of controlled foreign companies

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

747A Special rule for computing chargeable profits.

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748 Cases where section 747(3) does not apply.

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748ZA Exclusion of small profits exemptions

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748A Territorial exclusions from exemption under section 748

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749 Residence.

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749A Elections and designations under section 749: supplementary provisions.

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

749B Interests in companies.

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

750 Territories with a lower level of taxation.

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750A Deemed lower level of taxation: designer rate tax provisions.

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

751 Accounting periods and creditable tax

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

751A Reduction in chargeable profits for certain activities of EEA business establishments

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

751AA Reduction in chargeable profits for certain financing income

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

751AB Reduction in chargeable profits: failure to qualify for exemptions

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

751AC Reduction in chargeable profits following an exempt period

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

751B Sections 751A to 751AC : supplementary

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

752 Apportionment of chargeable profits and creditable tax

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

752A Relevant interests.

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

752B Section 752(3): the percentage of shares which a relevant interest represents.

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

752C Interpretation of apportionment provisions.

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753 Notices and appeals.

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

754 Assessment, recovery and postponement of tax.

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

754A Returns where it is not established whether acceptable distribution policy applies.

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754B Determinations requiring the sanction of the Board.

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

755 Information relating to controlled foreign companies

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

755A Treatment of chargeable profits and creditable tax apportioned to company carrying on life assurance business.

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

755B Amendment of return where general insurance business of foreign company accounted for on non-annual basis.

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

755C Application of Chapter where general insurance business of foreign company accounted for on non-annual basis.

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

755D “Control" and the two “40 per cent" tests.

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

756 Interpretation and construction of Chapter IV.

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

CHAPTER V OFFSHORE FUNDS

Meaning of offshore fund

756A General definition of offshore fund

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

Treatment of umbrella funds

756B Treatment of umbrella funds

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

Treatment of funds comprising more than one class of interest

756C Treatment of funds comprising more than one class of interest

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

Material interests in non-qualifying offshore funds

757 Disposal of material interests in non-qualifying offshore funds

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

758 Offshore funds operating equalisation arrangements

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

759 Material interests in offshore funds

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760 Non-qualifying offshore funds

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

Charge to tax of offshore income gains

761 Charge to income tax or corporation tax of offshore income gain.

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

762 Offshore income gains accruing to persons resident or domiciled abroad.

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762ZA Offshore income gains: application of transfer of assets abroad provisions

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762ZB Income treated as arising under section 761(1): remittance basis

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762A Exchange of interests of different classes

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763 Deduction of offshore income gain in determining capital gain.

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764 Offshore income gains of trustees.

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CHAPTER VI MISCELLANEOUS

Migration etc. of company

765 Migration etc. of companies.

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765A Movements of capital between residents of member States.

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766 Offences under section 765.

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767 Interpretation and commencement of sections 765 and 766.

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Change in ownership of company

767A Change in company ownership: corporation tax.

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767AA Change in company ownership: postponed corporation tax.

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767B Change of company ownership: supplementary.

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767C Change in company ownership: information.

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768 Change in ownership of company: disallowance of trading losses.

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768A Change in ownership: disallowance of carry back of trading losses.

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768B Change in ownership of company with investment business: deductions generally

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768C Deductions: asset transferred within group.

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768D Change in ownership of company carrying on property business.

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

768E Change in ownership of company with unused non-trading loss on intangible fixed assets

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

769 Rules for ascertaining change in ownership of company.

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

Transactions between associated persons

770A Provision not at arm’s length.

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

770 Sales etc. at an undervalue or overvalue.

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771 Transactions by petroleum companies.

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772 Information for purposes of section 770, and appeals.

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

773 Interpretation of sections 770 and 771.

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

774 Transactions between dealing company and associated company.

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

Factoring of income receipts etc

774A Meaning of “structured finance arrangement” for purposes of s.774B

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

774B Disregard of intended effects of arrangement involving disposals of assets

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774C Meaning of “structured finance arrangement” for purposes of s.774D

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

774D Disregard of intended effects of arrangement involving change in relation to a partnership

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

774E Sections 774B and 774D: exceptions

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774F Sections 774B and 774D: power to provide further exceptions

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

774G Sections 774A to 774D: minor definitions etc

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

Other provisions

775 Sale by individual of income derived from his personal activities.

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775A Transfers of rights to receive annual payments

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776 Transactions in land: taxation of capital gains.

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777 Provisions supplementary to section 776 .

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778 Power to obtain information.

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

779 Sale and leaseback: limitation on tax reliefs.

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780 Sale and leaseback: taxation of consideration received.

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781 Assets leased to traders and others.

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782 Leased assets: special cases.

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783 Leased assets: supplemental.

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

784 Leased assets subject to hire-purchase agreements.

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785 Meaning of “asset”, “capital sum” and “lease” for purposes of sections 781 to 784.

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785ZA Restrictions on use of losses: leasing partnerships

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785ZB Section 785ZA: definitions

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785A Rent factoring of leases of plant or machinery

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

785B Plant and machinery leases: capital receipts to be treated as income

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

785C Section 785B: interpretation

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785D Section 785B: lease of plant and machinery and other property

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785E Section 785B: expectation that relevant capital payment will not be paid

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786 Transactions associated with loans or credit.

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

787 Restriction of relief for payments of interest.

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

PART XVIII DOUBLE TAXATION RELIEF

CHAPTER I THE PRINCIPAL RELIEFS

788 Relief by agreement with other territories .

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

789 Arrangements made under old law.

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790 Unilateral relief.

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791 Power to make regulations for carrying out section 788.

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CHAPTER II RULES GOVERNING RELIEF BY WAY OF CREDIT

General

792 Interpretation of credit code.

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793 Reduction of United Kingdom taxes by amount of credit due.

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793A No double relief etc.

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

794 Requirement as to residence.

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795 Computation of income subject to foreign tax.

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795A Limits on credit: minimisation of the foreign tax.

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796 Limits on credit: income tax.

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

797 Limits on credit: corporation tax.

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

797A Foreign tax on items giving rise to a non-trading credit : loan relationships .

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797B Foreign tax on items giving rise to a non-trading credit: intangible fixed assets

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798 Section 796: trade income

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798A Section 797: trade income

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798B Section 798A: special cases

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798C Disallowed credit: use as deduction

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Tax underlying dividends

799 Computation of underlying tax.

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

801A Restriction of relief for underlying tax.

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

801B Dividends paid out of transferred profits.

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

801C Separate streaming of dividend so far as representing an ADP dividend of a CFC.

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802 U.K. insurance companies trading overseas.

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803 Underlying tax reflecting interest on loans.

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803A Foreign taxation of group as a single entity.

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Miscellaneous rules

804 Relief against income tax in respect of income arising in years of commencement.

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804ZA Schemes and arrangements designed to increase relief

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

804ZB Effect of notice under section 804ZA

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804ZC Notices under section 804ZA: further provision

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804A Life assurance companies with overseas branches etc: restriction of credit.

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804B Insurance companies carrying on more than one category of business: restriction of credit.

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804C Insurance companies: allocation of expenses etc in computations under section 35 of CTA 2009 .

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804D Interpretation of section 804C in relation to life assurance business etc.

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804E Interpretation of section 804C in relation to other insurance business.

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

804F Interpretation of sections 804A to 804E.

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804G Reduction in credit: payment by reference to foreign tax

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805 Elections against credit.

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806 Time limit for claims etc.

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

Foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax

806A Eligible unrelieved foreign tax on dividends: introductory.

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806B The amounts that are eligible unrelieved foreign tax.

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806C Onshore pooling.

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

806D Utilisation of eligible unrelieved foreign tax.

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

806E Rules for carry back of relievable tax under section 806D.

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806F Credit to be given for underlying tax before other foreign tax etc.

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806G Claims for the purposes of section 806D(4) or (5).

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806H Surrender of relievable tax by one company in a group to another.

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806J Interpretation of foreign dividend provisions of this Chapter.

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Application of foreign dividend provisions to branches or agencies in the UK of persons resident elsewhere

806K Application of foreign dividend provisions to branches or agencies in the UK of persons resident elsewhere.

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Unrelieved foreign tax: profits of overseas branch or agency

806L Carry forward or carry back of unrelieved foreign tax.

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806M Provisions supplemental to section 806L.

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CHAPTER III MISCELLANEOUS PROVISIONS

807 Sale of securities with or without accrued interest.

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807A Disposals and acquisitions of company loan relationships with or without interest.

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European cross-border transfers of business

807B Introduction to section 807C

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807C Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets

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European cross-border mergers

807D Introduction to section 807E

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807E Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets

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Transparent entities involved in cross-border transfers and mergers

807F Introduction to section 807G

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807G Tax treated as chargeable in respect of relevant transactions

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808 Restriction on deduction of interest or dividends from trading income.

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808A Interest: special relationship.

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808B Royalties: special relationship.

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809 Relief in respect of discretionary trusts.

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810 Postponement of capital allowances to secure double taxation relief.

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811 Deduction for foreign tax where no credit allowable.

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812 Withdrawal of right to tax credit of certain non-resident companies connected with unitary states.

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813 Recovery of tax credits incorrectly paid.

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

814 Arrangements to avoid section 812.

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815 Power to inspect documents.

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815A Transfer of a non-UK trade.

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

815AZA UK residents and foreign enterprises

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

815AA Mutual agreement procedure and presentation of cases under arrangements.

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

815B The Arbitration Convention.

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815C Exchange of information with other territories .

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816 Disclosure of information.

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PART XIX SUPPLEMENTAL

Miscellaneous

817 Deductions not to be allowed in computing profits or gains.

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818 Arrangements for payments of interest less tax or of fixed net amount.

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819 Old references to standard rate tax.

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820 Application of Income Tax Acts from year to year.

In order to ensure the collection in due time of income tax which may be granted for any year commencing on 6th April, all such provisions contained in the Income Tax Acts as were in force on the preceding day shall have full force and effect with respect to tax which may be so granted, in the same manner as if that tax had been actually granted by Act of Parliament and those provisions had been applied thereto by the Act.

821 Under-deductions from payments made before passing of annual Act.

(1) Where, in any year of assessment or accounting period , any half-yearly or quarterly payments (or half-periodic or quarterly payments) have been made on account of any interest, dividends or other annual profits or gains, previously to the passing of the Act imposing income or corporation tax for that year or period , and tax has not been charged thereon or deducted therefrom or has not been charged thereon or deducted therefrom at the rate ultimately imposed for that year or period —

(a) the amount not so charged or deducted shall be charged in respect of those payments to income tax under Chapter 2 of Part 4 of ITTOIA 2005 (interest) or shall be charged to corporation tax . . . . . . ; and

(b) the agents entrusted with the payment of the interest, dividends or other annual profits or gains shall furnish to the Board a list containing the names and addresses of the persons to whom payments have been made and the amount of those payments, upon a requisition made by the Board in that behalf.

(2) Any person liable to pay any rent, interest or annuity, or to make any other annual payment—

(a) shall be authorised—

(i) to make any deduction on account of income tax for any year of assessment which he has failed to make previously to the passing of the Act imposing the tax for that year, or

(ii) to make up any deficiency in any such deduction which has been so made,

on the occasion of the next payment of the rent, interest or annuity or making of the other annual payment after the passing of the Act so imposing the tax, in addition to any other deduction which he may be by law authorised to make; and

(b) shall also be entitled, if there is no future payment from which the deduction may be made, to recover the sum which might have been deducted as if it were a debt due from the person as against whom the deduction could originally have been made if the Act imposing the tax for the year had been in force.

(3) Subsection (2) above shall apply with respect to—

(a) any payment to which section 906 of ITA 2007 applies (certain royalties etc where usual place of abode of owner is abroad), and

(aa) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) any royalty or other sum paid in respect of the user of a patent; . . .

as it applies with respect to any rent, interest, annuity or other annual payment.

(4) In this section “ interest ” and “ dividends ” do not include any interest or dividend which is a distribution.

822 Over-deductions from interest on loan capital etc. made before passing of annual Act.

(1) If in any year of assessment (“ the year ”) a resolution having statutory effect under the Provisional Collection of Taxes Act 1968 provides for the charging of income tax at a lower rate less than that charged for the previous year, the following provisions of this section shall have effect with respect to deductions in respect of income tax by any body corporate, from payments of interest (not being a distribution) on any of its securities.

(2) Any deduction which was made before the expiration of one month from the passing of the resolution and which would, if the tax had been renewed at the rate imposed for the previous year, have been a legal deduction, shall be deemed to be a deduction rendered legal by section 2 of the Provisional Collection of Taxes Act 1968 and that section shall, subject to this section, apply accordingly.

(3) Any over-deduction to be made good under that section may be made good by a reduction of the amount of tax deducted from the next payment of like nature made on the security in question after the passing of the Act imposing the tax for the year.

(4) Any amount made good under section 2 of the Provisional Collection of Taxes Act 1968 shall—

(a) in the case of an over-deduction which is made good under subsection (3) above, enure to the benefit of the person entitled to the payment on the occasion of which the over-deduction is made good; and

(b) in any other case, enure to the benefit of the person entitled to the security in question at the date when the amount is made good,

irrespective, in either case, of whether or not he is the person who was entitled to the payment, or to the security at the date when the original deduction was made.

(5) Subsection (3) above shall not authorise the retention of any part of the amount over-deducted for more than one year from the passing of the Act imposing the tax for the year.

823 Adjustments of reliefs where given at different times.

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824 Repayment supplements: individuals and others.

(1) Subject to the following provisions of this section, a repayment made by the Board or an officer of the Board of any of the following, namely—

(a) an amount paid on account of income tax under section 59A of the Management Act;

(b) any income tax paid by or on behalf of an individual for a year of assessment;

(c) a penalty payable under any paragraph of Schedule 56 to the Finance Act 2009 in respect of an amount falling within any of the following items of the Table in paragraph 1 of that Schedule—

(i) item 1, 12, 18 or 19; or

(ii) insofar as the tax falls within item 1, item 17, 23 or 24; and

(d) a penalty incurred by an individual under any of the provisions of that Act the Finance Act 2009 or Schedules 24 to 26 to the Finance Act 2021 ,

shall be increased under this section by an amount (a “ repayment supplement ”) equal to interest on the amount repaid at the rate applicable under section 178 of the Finance Act 1989 for the period (if any) between the relevant time and the date on which the order for the repayment is issued.

(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(2A) Subsection (1) above shall apply to a repayment made in consequence of a claim under section 228 of the Income Tax Act 1952 (relief in respect of income accumulated under trusts) as if the repayment were of income tax paid by the claimant for the year of assessment in which the contingency mentioned in that section happened.

(2B) Subsection (1) above shall apply to a payment made by the Board under section 375(8) (payment of amount which borrower would have been able to deduct from interest payment under section 369(1)) as if the payment were a repayment falling within that subsection.

(2C) Subsection (1) above shall apply to a repayment made by the Board as a result of a claim for relief under—

(a) paragraph 2 of Schedule 1B to the Management Act (carry back of loss relief),

(b) paragraph 3 of that Schedule (relief for fluctuating profits of farming etc.), or

as if it were a repayment falling within that subsection.

(2D) Subsection (1) shall apply—

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

(b) to a payment made under paragraph 6(1) of Schedule 14 (payment where entitlement to life assurance premium relief has not been given by deduction) as if the payment were a repayment of income tax paid for the tax year in which the entitlement to relief arose.

(3) For the purposes of subsection (1) above—

(aa) if the repayment is a payment made by the Board under section 375(8), the relevant time is—

(i) if the interest payment was made in the year 1996-97 or a subsequent year of assessment, the 31st January next following that year;

(ii) if the interest payment was made in an earlier year of assessment, the 5th April next following that year;

(ab) if the repayment is a repayment as a result of a claim for relief under any of the provisions mentioned in subsection (2C) above, the relevant time is the 31st January next following the year that is the later year in relation to the claim;

(ac) if the repayment is a repayment as a result of a claim under section 496B of ITA 2007 (relief for payments by discretionary trust taxable as employment income), the relevant time is the 31 January next following the end of the tax year to which the claim relates;

(ad) if the repayment is a payment falling within subsection (2D)(b), the relevant time is 31 January next following the end of the tax year in which the entitlement to relief arose;

(a) if the repayment is—

(i) the repayment of an amount paid in accordance with the requirements of section 59A of the Management Act on account of income tax for a year of assessment, or

(ii) the repayment of income tax for such a year which is not income tax deducted at source (other than a repayment within paragraph (ac)) ,

the relevant time is the date of the payment that is being repaid;

(b) if the repayment is of income tax deducted at source for a year of assessment, the relevant time is the 31st January next following that year; and

(c) if the repayment is of a penalty or surcharge, the relevant time is the date on which the penalty or surcharge was paid .

(4) For the purposes of subsection (3) above, where a repayment in respect of income tax for a year of assessment is made to any person, that repayment—

(a) shall be attributed first to so much of any payment made by him under section 59B of the Management Act as is a payment in respect of income tax for that year;

(b) in so far as it exceeds the amount (if any) to which it is attributable under paragraph (a) above, shall be attributed in two equal parts to each of the payments made by him under section 59A of the Management Act on account of income tax for that year;

(c) in so far as it exceeds the amounts (if any) to which it is attributable under paragraphs (a) and (b) above, shall be attributed to income tax deducted at source for that year; and

(d) in so far as it is attributable to a payment made in instalments shall be attributed to a later instalment before being attributed to an earlier one.

(4A) In this section any reference to income tax deducted at source for a year of assessment is a reference to—

(a) income tax deducted or treated as deducted from any income, or treated as paid on any income, in respect of that year, . . .

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

but does not include a reference to amounts which, in that year, are deducted at source under PAYE regulations in respect of previous years.

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

(6) . . . The Treasury may by order from time to time increase or decrease the rate of interestby reference to which—

(a) repayment supplements are calculated under subsection (1) above; and

(b) repayment supplements are calculated under section 47 of the Finance (No. 2) Act 1975.

(7) A repayment supplement shall not be payable under this section in respect of a repayment or payment made in consequence of an order or judgment of a court having power to allow interest on the repayment or payment, or in respect of a repayment of a post-war credit within the meaning of the Income Tax (Repayment of Post-War Credits) Act 1959.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) Subsections (1) to (7) above shall apply in relation to . . . the trustees of a settlement , scheme administrators of registered pension schemes sub-scheme administrators of sub-schemes which form part of a split scheme pursuant to the Registered Pensions (Splitting of Schemes) Regulations 2006 or personal representatives . . . as they apply in relation to an individual.

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

825 Repayment supplements: companies.

(1) This section applies to the following payments made to a company in connection with any accounting period for which the company was resident in the United Kingdom (“ the relevant accounting period ”), that is to say—

(a) a repayment of corporation tax paid by the company for that accounting period (including advance corporation tax paid in respect of distributions made by the company in that accounting period . . . ); or

(b) a repayment of income tax in respect of a payment received by the company in that accounting period on which the company bore income tax by deduction; . . .

(2) Subject to the following provisions of this section, where a payment . . . to which this section applies is made by the Board or an inspector after the end of the 12 months beginning with the material date, the payment shall be increased under this section by an amount (a “ repayment supplement ”) equal to interest on the amount paid at the rate applicable under section 178 of the Finance Act 1989 for each complete tax month contained in the period (if any) beginning with the relevant date and ending at the end of the tax month in which the order for the payment is issued.

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) For the purposes of subsection (2) above—

(a) if the payment is a repayment of corporation tax that was paid on or after the first anniversary of the material date, the relevant date is the anniversary of the material date that occurs next after the date on which that tax was paid;

(b) in any other case, the relevant date is the first anniversary of the material date;

and where a payment to which this section applies is a repayment of corporation tax paid by a company on different dates, the payment shall as far as possible be treated for the purposes of this subsection as a repayment of tax paid on a later rather than an earlier date among those dates.

(4) For the purposes of this section—

(a) a repayment of corporation tax made in consequence of a claim by a company under section 239(3) to have the whole or any part of an amount of surplus advance corporation tax arising in the case of any accounting period treated as if it were advance corporation tax paid in respect of distributions made by the company in any earlier accounting period shall be treated as a repayment of corporation tax paid for the accounting period in the case of which that amount of surplus advance corporation tax arose; and

(b) a repayment of income tax or corporation tax made on a claim under subsection (4) of section 419 shall be treated as if it were a repayment of corporation tax paid for the accounting period in which the repayment of, or of the part in question of, the loan or advance mentioned in that subsection was made; and

(c) a repayment of corporation tax or income tax falling to be made as a result of a claim under section 393A(1) to have the whole or any part of a loss incurred in an accounting period set off against profits of an earlier accounting period (“ the earlier period ”)—

(i) shall, in a case where the earlier period falls wholly within the period of twelve months immediately preceding the accounting period in which the loss was incurred, be treated as a repayment of tax paid for the earlier period; and

(ii) in any other case, shall be treated as a repayment of tax paid for the accounting period in which the loss is incurred; and

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

(5) . . . The Treasury may by order from time to time increase or decrease the rate of interest by reference to which repayment supplements are calculated under subsection (2) above.

(6) A repayment supplement shall not be payable under this section in respect of a payment made in consequence of an order or judgment of a court having power to allow interest on the payment.

(7) A repayment supplement paid under this section shall be disregarded for all purposes of income tax and corporation tax.

(8) In this section—

“ tax month ” means the period beginning with the 6th day of any calendar month and ending with the 5th day of the following calendar month;
“ the material date ” in relation to a payment to which this section applies, means the last date on which corporation tax on any of the profits of the company in question arising in the relevant accounting period could have been paid—
(a)
in a case where section 10(1) applies, within the nine months there mentioned;
(b)
in a case where section 478 applies, within the time limit imposed by subsection (2)(a) of that section, but subject to subsection (6) of that section.

(9) This section has effect subject to section 826(8).

826 Interest on tax overpaid.

(1) In any case where—

(a) a repayment falls to be made of corporation tax paid by a company for an accounting period which ends after the appointed day; or

(aa) a repayment falls to be made under sections 246N and 246Q of advance corporation tax paid by a company in respect of distributions made by it in such an accounting period; or

(b) a repayment of income tax falls to be made in respect of a payment received by a company in such an accounting period; or

(d) a payment of R&D tax credit falls to be made to a company under Chapter 2 or 7 of Part 13 of CTA 2009 in respect of an accounting period ; or

(da) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) a payment of land remediation tax credit or life assurance company tax credit falls to be made to a company under Part 14 of CTA 2009 in respect of an accounting period ; or

(f) a payment of film tax credit falls to be made to a company , or

(fa) a payment of television tax credit falls to be made to a company; or

(fb) a payment of video game tax credit falls to be made to a company; or

(fc) a payment of theatre tax credit falls to be made to a company; or

(fd) a payment of orchestra tax credit falls to be made to a company; or

(fe) a payment of museums and galleries exhibition tax credit falls to be made to a company; or

(g) a payment of first-year tax credit falls to be made to a company under Schedule A1 to the Capital Allowances Act,

then, from the material date until the order for repayment or payment is issued , the repayment or payment shall carry interest at the rate which, under section 89 of the Management Act, is for the time being the prescribed rate for the purposes of this section.

(2) Subject to section 826A(2), in relation to corporation tax paid by a company for an accounting period, the material date for the purposes of this section is the date on which corporation tax was paid or, if it is later, the date on which corporation tax for that accounting period became (or, as the case may be, would have become) due and payable in accordance with section 59D of the Management Act (payment of corporation tax) .

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In relation to a repayment of income tax falling within subsection (1)(b) above . . . , the material date is the day after the end of the accounting period in which the payment referred to in subsection (1)(b) above . . . was received by the company.

(3A) In relation to a payment of R&D tax credit falling within subsection (1)(d) above the material date is whichever is the later of—

(a) the filing date for the company’s company tax return for the accounting period for which the R&D tax credit is claimed, and

(b) the date on which the company tax return or amended company tax return containing the claim for payment of the R&D tax credit is delivered to the Inland Revenue.

For this purpose “ the filing date ”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

(3AA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3B) In relation to a payment of land remediation tax credit or life assurance company tax credit falling within subsection (1)(e) above the material date is whichever is the later of—

(a) the filing date for the company’s company tax return for the accounting period for which the land remediation tax credit or the life assurance company tax credit is claimed, and

(b) the date on which the company tax return or amended company tax return containing the claim for payment of the land remediation tax credit or the life assurance company tax credit is delivered to the Inland Revenue.

For this purpose “ the filing date ”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

(3C) In relation to a payment of film tax credit , television tax credit , video game tax credit , theatre tax credit , orchestra tax credit or museums and galleries exhibition tax credit the material date is whichever is the later of—

(a) the filing date for the company's company tax return for the accounting period for which the tax credit is payable, and

(b) the date on which the company tax return or amended company tax return containing the claim for payment is delivered to an officer of Revenue and Customs.

For this purpose “ the filing date ”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

(3D) In relation to a payment of first-year tax credit falling within subsection (1)(g) above the material date is whichever is the later of—

(a) the filing date for the company's company tax return for the accounting period for which the tax credit is claimed, and

(b) the date on which the company tax return or amended company tax return containing the claim for payment of the tax credit is delivered to the Commissioners for Her Majesty's Revenue and Customs.

For this purpose “ the filing date ”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

(4) For the purposes of this section a repayment of tax made on a claim under section 458 of CTA 2010 shall be treated as if it were a repayment of corporation tax for the accounting period in which the event giving rise to entitlement to relief under that section occurred but, in relation to such a repayment of tax, the material date for the purposes of this section is—

(a) the date when the entitlement to relief in respect of the repayment accrued, that is to say—

(i) where the repayment , or the release or writing off, of the loan or advance (or part thereof) occurred on or after the day mentioned in section 458(4) of CTA 2010 , the date nine months after the end of that accounting period; and

(ii) in any other case, the date nine months after the end of the accounting period in which the loan or advance was made;

(b) if it is later, the date on which the tax which is to be repaid was in fact paid.

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

(5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Where a repayment of corporation tax is a repayment of tax paid by a company on different dates, the repayment shall so far as possible be treated for the purposes of this section as a repayment of tax paid on a later rather than an earlier date among those dates.

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7A) In any case where—

(a) a company carrying on a trade incurs a loss in the trade in an accounting period (“ the later period ”),

(b) as a result of a claim under section 37 of CTA 2010 , the whole or any part of that loss is relieved (whether under section 37 or 42 of that Act ) for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period (“ the earlier period ”) which does not fall wholly within the period of twelve months immediately preceding the later period, and

(c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of that repayment as falls to be made as a result of the claim under section 37 of CTA 2010 , except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below .

(7AA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7AA) In any case where—

(a) a company ceases to carry on a trade in an accounting period (“the terminal period”),

(b) as a result of a claim under section 45F of CTA 2010, the whole or any part of a loss made in the trade is relieved for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period (“ the earlier period ”) which does not fall wholly within the period of 12 months immediately preceding the terminal period, and

(c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of that repayment as falls to be made as a result of the claim under section 45F, except so far as concerns interest for any time after the date on which any corporation tax for the terminal period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below).

(7B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7BB) Subject to subsection (7BC) below, in any case where—

(a) within the meaning of section 806D, any relievable underlying tax or relievable withholding tax arises in an accounting period of a company (“ the later period ”),

(b) pursuant to a claim under section 806G, the whole or any part of that tax is treated as mentioned in section 806D(4)(c) or (5)(c) in relation to the single related dividend or the single unrelated dividend arising in an earlier accounting period (“ the earlier period ”), and

(c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 806G, except so far as concerns interest for any time after the date on which any corporation tax for the later period became due and payable (as mentioned in subsection (7D) below).

(7BC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7C) In a case where—

(a) there is for an accounting period of a company (“ the later period ”) a non-trading deficit on the company’s loan relationships,

(b) as a result of a claim under section 389(1) or 459(1)(b) of CTA 2009 the whole or part of the deficit for the later period is set off against profits of an earlier accounting period (“ the earlier period ”), and

(c) a repayment falls to be made of corporation tax for the earlier period or of income tax in respect of a payment received by the company in that accounting period ,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 389(1) or 459(1)(b) of CTA 2009 except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below .

(7CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7D) In subsections (7), (7A), (7AA), (7B) , (7BB) and (7C) above, any reference to the date on which corporation tax for an accounting period became, or would have become, due and payable shall be construed on the basis that corporation tax for an accounting period becomes due and payable on the day following the expiry of nine months from the end of the accounting period.

(7E) The power conferred by section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) does not include power to make provision in relation to subsection (7), (7A), (7AA) (7B), (7BB), (7C) or (7D) above the effect of which would be to change the meaning of references in subsection (7), (7A), (7AA) (7B) , (7BB) or (7C) above to the date on which corporation tax for an accounting period became, or would have become, due and payable (as mentioned in subsection (7D) above).

(8) In consequence of the preceding provisions of this section, no repayment supplement (within the meaning of section 825) shall be paid in respect of any repayment of tax or payment of tax credit where the relevant accounting period (within the meaning of that section) ends after the appointed day.

(8A) Where—

(a) interest has been paid to a company under subsection (1)(a) , (d) , (e) (f), (fa), (fb) , (fc) , (fd) or (fe) above,

(b) there is—

(i) a change in the company’s assessed liability to corporation tax, or

(ii) a change in the amount of the R&D tax credit . . . , land remediation tax credit or life assurance company tax credit or film tax credit or television tax credit or video game tax credit or theatre tax credit or orchestra tax credit or museums and galleries exhibition tax credit or first-year tax credit under Schedule A1 to the Capital Allowances Act payable to the company (which does not result in a change falling within sub-paragraph (i)),

other than a change which in whole or in part corrects an error made by the Board or an officer of the Board, and

(c) as a result only of that change (and, in particular, not as a result of any error in the calculation of the interest), it appears to an officer of the Board that the interest ought not to have been paid, either at all or to any extent,

the interest that ought not to have been paid may be recovered from the company as if it were interest charged under Part IX of the Management Act (interest on overdue tax).

(8B) For the purposes of subsection (8A) above, the cases where there is a change in a company’s assessed liability to corporation tax are those cases where—

(a) an assessment, or an amendment of an assessment, of the amount of corporation tax payable by the company for the accounting period in question is made, or

(b) a determination of that amount is made under paragraph 36 or 37 of Schedule 18 to the Finance Act 1998(which until superseded by a self-assessment under that Schedule has effect as if it were one),

whether or not any previous assessment or determination has been made.

(8BA) For the purposes of subsection (8A)(b) above, the cases where there is a change in the amount of the R&D tax credit . . . , the land remediation tax credit or the life assurance company tax credit or film tax credit or television tax credit or video game tax credit or theatre tax credit or orchestra tax credit or museums and galleries exhibition tax credit or first-year tax credit under Schedule A1 to the Capital Allowances Act payable to the company are those cases where an assessment, or an amendment to an assessment, is made to recover an amount of R&D tax credit . . . , land remediation tax credit or life assurance company tax credit or film tax credit or television tax credit or video game tax credit or theatre tax credit or orchestra tax credit or museums and galleries exhibition tax credit or first-year tax credit under Schedule A1 to the Capital Allowances Act paid to the company for the accounting period in question.

(8C) In subsection (8A)(b) above “ error ” includes—

(a) any computational error; and

(b) the allowance of a claim or election which ought not to have been allowed.

(9) In this section “ the appointed day ” means such day or days, not being earlier than 31st March 1992, as the Treasury may by order appoint for the purposes of this section.

826A Interest on payments in respect of corporation tax and meaning of “the material date".

(1) The Treasury may by regulations make provision applying section 826, with such modifications as may be prescribed, for the purpose of conferring on companies of such descriptions as may be prescribed a right to interest—

(a) on such payments made by them in respect of corporation tax as may be prescribed,

(b) at the rate applicable under section 178 of the Finance Act 1989, and

and for treating any such interest for the purposes, or prescribed purposes, of the Tax Acts as interest under section 826(1)(a) on a repayment of corporation tax.

(2) The Treasury may by regulations make provision modifying section 826(2) in relation to companies of such description as may be prescribed.

(3) Subsections (1) and (2) above do not apply in relation to companies in relation to which section 826(2) is modified or otherwise affected by regulations under section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) in relation to the accounting period to which the corporation tax in question relates.

(4) Where the Treasury make regulations under subsection (2) above in relation to companies of any description, they may also make regulations modifying section 59DA(2) of the Management Act in relation to those companies, or any description of such companies, by varying the date before which the claim there mentioned may not be made.

(5) Regulations under this section—

(a) may make different provision in relation to different cases or circumstances or in relation to companies or accounting periods of different descriptions;

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

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

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

827 VAT penalties etc.

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

827A Territorial scope of charges under certain provisions to which section 836B applies

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

828 Orders and regulations made by the Treasury or the Board.

(1) . . . Any power of the Treasury or the Board to make any order or regulations under this Act . . . shall be exercisable by statutory instrument.

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

(3) Subject to subsection (4) below and to any other provision to the contrary, any statutory instrument containing any order or regulations made by the Treasury or the Board . . . shall be subject to annulment in pursuance of a resolution of the House of Commons.

(4) Subsection (3) above shall not apply in relation to an order or regulations made under section . . . . . . . . . . . . . . . . . . . . . 590C(6) . . . . . . . . . or paragraph 7 of Schedule 14 . . . or—

(a) if any other Parliamentary procedure is expressly provided;

(b) if the order in question is an order appointing a day for the purposes of any provision of the Tax Acts, being a day as from which the provision will have effect, with or without amendments, or will cease to have effect.

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

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

829 Application of Income Tax Acts to public departments and avoidance of exempting provisions.

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

830 Territorial sea . . . .

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

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

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

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

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

Interpretation

831 Interpretation of this Act.

(1) In this Act, except so far as the context otherwise requires—

(a) “ the Corporation Tax Acts ” means the enactments relating to the taxation of the income and chargeable gains of companies and of company distributions (including provisions relating also to income tax); and

(b) “ the Income Tax Acts ” means the enactments relating to income tax, including any provisions of the Corporation Tax Acts which relate to income tax.

(2) In this Act “ the Tax Acts ”, except so far as the context otherwise requires, means this Act and all other provisions of the Income Tax Acts and the Corporation Tax Acts.

(3) In this Act—

“ CTA 2009 ” means the Corporation Tax Act 2009;
“ CTA 2010 ” means the Corporation Tax Act 2010;
“ ITEPA 2003 ” means the Income Tax (Earnings and Pensions) Act 2003;
“ ITTOIA 2005 ” means the Income Tax (Trading and Other Income) Act 2005;
“ ITA 2007 ” means the Income Tax Act 2007;
“ the Management Act ” means the Taxes Management Act 1970;
“ TIOPA 2010 ” means the Taxation (International and Other Provisions) Act 2010;
“ the 1968 Act ” means the Capital Allowances Act 1968;
“ the 1970 Act ” means the Income and Corporation Taxes Act 1970; and
“ the 1979 Act ” means the Capital Gains Tax Act 1979.
“ the 1990 Act ” means the Capital Allowances Act 1990.
“ the 1992 Act ” means the Taxation of Chargeable Gains Act 1992.

(4) Section 1 of the Family Law Reform Act 1987, the paragraph inserted in Schedule 1 to the Interpretation Act 1978 by paragraph 73 of Schedule 2 to that Act and section 1(3) of the Law Reform (Parent and Child) (Scotland) Act 1986 (legal equality of illegitimate children) shall be disregarded in construing references in this Act to a child or to children (however expressed).

(5) This Act, so far as it relates to capital gains tax, shall be construed as one with the 1992 Act.

(6) Any reference in this Act to a section, Part or Schedule is a reference to that section, Part or Schedule of or to this Act, unless the context otherwise requires.

832 Interpretation of the Corporation Tax Acts etc .

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833 Interpretation of Income Tax Acts.

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834 Interpretation of the Corporation Tax Acts.

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834A Miscellaneous charges (list for the purposes of certain provisions that formerly referred to Case VI of Schedule D)

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834B Meaning of “UK property business” and “overseas property business”

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834C Total profits

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835 “Total income” in the Income Tax Acts.

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836 Returns of total income.

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836A Generally accepted accounting practice

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836B Table of provisions to which this section applies

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837 “Annual value” of land.

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837A Meaning of “ research and development ”.

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837B Meaning of “ oil and gas exploration and appraisal ”.

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837C Meaning of “offshore installation”

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838 Subsidiaries.

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839 Connected persons.

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840 Meaning of “control” in certain contexts.

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840ZA Meaning of “tax advantage”

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840A Banks.

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841 Meaning of “recognised stock exchange” etc

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841A Recognised clearing systems.

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842 Investment trusts.

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842AA Venture capital trusts.

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842A Local authorities.

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842B Meaning of . . . “property investment LLP”

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Commencement, savings, repeals etc.

843 Commencement.

(1) Except as otherwise provided by the following provisions of this section, this Act shall come into force in relation to tax for the year 1988-89 and subsequent years of assessment, and for companies’ accounting periods ending after 5th April 1988.

(2) Except as otherwise provided by the following provisions of this section, such of the provisions of this Act as relate to capital gains tax (including the provisions of Part XVIII as applied to capital gains tax by section 277 of the 1992 Act ) shall come into force in relation to that tax for the year 1988-89 and subsequent years of assessment.

(3) The following provisions of this Act, that is to say—

(a) so much of any provision as authorises the making of any Order in Council or regulations or other instrument;

(b) so much of any provision as relates to the making of a return, the furnishing of a certificate or the giving of any other information, including any such provision which imposes a duty on the Board or an officer of the Board as well as any such provision which imposes a duty on any other person;

(d) except where the tax concerned is all tax for years of assessment before the year 1988-89 or accounting periods ending before 6th April 1988, so much of any other provision as confers any power or imposes any duty the exercise or performance of which operates or may operate in relation to tax for more than one chargeable period,

shall come into force for all purposes on 6th April 1988 to the exclusion of the corresponding enactments repealed by this Act.

(4) This section has effect except as otherwise provided by any other provision of this Act, and in particular except as provided by sections 96, 380 to 384, 393, . . ., 400, 703 . . . .

844 Savings, transitional provisions, consequential amendments and repeals.

(1) Schedule 29, which makes amendments to other enactments consequential on the passing of this Act, shall have effect.

(2) Schedule 29, section 843 and this section are without prejudice to the provisions of the Interpretation Act 1978 as respects the effect of repeals.

(3) Schedule 30 which contains savings and transitional provisions shall have effect.

(4) The enactments mentioned in Schedule 31 are hereby repealed to the extent specified in the third column of that Schedule.

(5) Subject to subsection (6) below, section 843(3), Schedule 30 and to any other provision of this Act by which any provision is brought into force to the exclusion of the corresponding enactments repealed by this Act, those repeals shall come into force in accordance with subsections (1) and (2) of section 843.

(6) No provision mentioned in subsection (5) above shall be taken as bringing a repeal into force except to the extent that the repealed enactment is being superseded.

845 Short title.

This Act may be cited as the Income and Corporation Taxes Act 1988.

SCHEDULES

SCHEDULE A1 Determination of profits attributable to permanent establishment: supplementary provisions

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SCHEDULE A2 Corporation tax: the non-corporate distribution rate: supplementary provisions

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SCHEDULE 1

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SCHEDULE 2

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SCHEDULE 3

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SCHEDULE 4

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SCHEDULE 4AA

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SCHEDULE 4A CREATIVE ARTISTS: RELIEF FOR FLUCTUATING PROFITS

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SCHEDULE 5

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SCHEDULE 5AA

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SCHEDULE 5A Stock lending: interest on cash collateral

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SCHEDULE 6

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Schedule 6A

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SCHEDULE 7

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SCHEDULE 7A Beneficial loans: loans on ordinary commercial terms

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SCHEDULE 8

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Sections 185, 186, 187.

PART I GENERAL

1 (1) Subject to the provisions of this Schedule, on the application of a body corporate (“ the grantor ”) which has established a share option scheme or a profit sharing scheme, the Board shall approve the scheme if they are satisfied that it fulfils such requirements of Part II and this Part as apply in relation to the scheme in question, and the requirements of Part III, IV or V of this Schedule; and in this Schedule—

“ the relevant requirements ” means, in relation to any scheme, the requirements of this Schedule by reference to which the scheme is approved; and
“ savings-related share option scheme ” means a scheme in relation to which the relevant requirements include the requirements of Part III of this Schedule.

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

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

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

2 (1) The Board shall not approve a scheme under this Schedule if it appears to them that it contains features which are neither essential nor reasonably incidental to the purpose of providing for employees and directors benefits in the nature of rights to acquire shares or, in the case of a profit sharing scheme, in the nature of interests in shares.

(2) A profit sharing scheme shall not be approved under paragraph 1 above unless the Board are satisfied that, whether under the terms of the scheme or otherwise, every participant in the scheme is bound in contract with the grantor—

(a) to permit his shares to remain in the hands of the trustees throughout the period of retention; and

(b) not to assign, charge or otherwise dispose of his beneficial interest in his shares during that period; and

(c) if he directs the trustees to transfer the ownership of his shares to him at any time before the release date, to pay to the trustees before the transfer takes place a sum equal to income tax at the basic rate on the appropriate percentage of the locked-in value of the shares at the time of the direction; and

(d) not to direct the trustees to dispose of his shares at any time before the release date in any other way except by sale for the best consideration in money that can reasonably be obtained at the time of the sale or, in the case of redeemable shares in a workers’ cooperative, by redemption.

(2A) The Board shall not approve a profit sharing scheme unless they are satisfied—

(a) that the arrangements for the scheme do not make any provision, and are not in any way associated with any provision made, for loans to some or all of the employees of—

(i) the company that established the scheme, or

(ii) in the case of a group scheme, any participating company, and

(b) that the operation of the scheme is not in any way associated with such loans.

(2B) For the purposes of sub-paragraph (2A) above “ arrangements ” includes any scheme, agreement or understanding, whether or not legally enforceable.

(3) The Board must be satisfied in the case of a savings-related share option scheme or a profit sharing scheme—

(a) that there are no features of the scheme (other than any which are included to satisfy requirements of this Schedule) which have or would have the effect of discouraging any description of employees or former employees who fulfil the conditions in paragraph 26(1) or, as the case may be, 36(1) below from actually participating in the scheme; and

(b) where the grantor is a member of a group of companies, that the scheme does not and would not have the effect of conferring benefits wholly or mainly on directors of companies in the group or on those employees of companies in the group who are in receipt of the higher or highest levels of remuneration.

(4) For the purposes of sub-paragraph (3) above “ a group of companies ” means a company and any other companies of which it has control.

3 (1) If, at any time after the Board have approved a share option scheme, any of the relevant requirements ceases to be satisfied or the grantor fails to provide information requested by the Board under paragraph 6 below, the Board may withdraw the approval with effect from that time or such later time as the Board may specify; but where rights obtained under a savings-related share option scheme before the withdrawal of approval from the scheme under this paragraph are exercised after the withdrawal, section 185(3) shall apply in respect of the exercise as if the scheme were still approved.

(2) If at any time after the Board have approved a profit sharing scheme—

(a) a participant is in breach of any of his obligations under paragraph 2(2)(a), (c) and (d) above; or

(b) there is, with respect to the operation of the scheme, any contravention of any of the relevant requirements, Schedule 10, the scheme itself or the terms of the trust referred to in paragraph 30(1)(c) below; or

(c) any shares of a class of which shares have been appropriated to the participants receive different treatment in any respect from the other shares of that class, in particular, different treatment in respect of—

(i) the dividend payable;

(ii) repayment;

(iii) the restrictions attaching to the shares; or

(iv) any offer of substituted or additional shares, securities or rights of any description in respect of the shares; or

(ca) the Board—

(i) cease to be satisfied of the matters mentioned in paragraph 2(2A) above, or

(ii) in the case of a scheme approved before 21st March 2000, are not satisfied of those matters; or

(d) the Board cease to be satisfied that the scheme complies with the requirements of paragraph 2(3) above or paragraph 36 below; or

(e) the trustees, the grantor or, in the case of a group scheme, a company which is or has been a participating company fail or fails to furnish any information which they are or it is required to furnish under paragraph 6 below ; or,

(f) the trustees appropriate shares to participants, one or more of whom have had free shares appropriated to them, at an earlier time in the same year of assessment, under a relevant share plan ,

the Board may, subject to sub-paragraph (3) below, withdraw the approval with effect from that time or from such later time as the Board may specify.

(3) It shall not be a ground for withdrawal of approval of a profit sharing scheme that shares which have been newly issued receive, in respect of dividends payable with respect to a period beginning before the date on which the shares were issued, treatment which is less favourable than that accorded to shares issued before that date.

(4) For the purposes of sub-paragraph (2)(f) above the reference to persons having had free shares appropriated to them includes persons who would have had free shares appropriated to them but for their failure to obtain a performance allowance (within the meaning of paragraph 25 of Schedule 8 to the Finance Act 2000).

(5) In sub-paragraph (2)(f) and (4) above—

“ free shares ” has the same meaning as in Schedule 8 to the Finance Act 2000;
“ relevant share plan ”, in relation to a profit sharing scheme, means an employee share ownership plan that—
(a)
was established by the grantor or a connected company, and
(b)
is approved under Schedule 8 to that Act.

(6) For the purposes of sub-paragraph (5) above “ connected company ” means—

(a) a company which controls or is controlled by the grantor or which is controlled by a company which also controls the grantor, or

(b) a company which is a member of a consortium owning the grantor or which is owned in part by the grantor as a member of a consortium.

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

5 If aggrieved—

(a) in any case, by the failure of the Board to approve the scheme or to approve an alteration in the scheme or by the withdrawal of approval; or

(b) in the case of a savings-related share option scheme, by the failure of the Board to decide that a condition subject to which the approval has been given is satisfied; or

(c) in the case of a profit sharing scheme, by the failure of the Board to approve an alteration in the terms of the trust referred to in paragraph 30(1)(c) below;

the grantor may, by notice given to the Board within 30 days from the date on which it is notified of the Board’s decision, require the matter to be determined by the Special Commissioners, and the Special Commissioners shall hear and determine the matter in like manner as an appeal.

6 The Board may by notice require any person to furnish them, within such time as the Board may direct (not being less than 30 days), with such information as the Board think necessary for the performance of their functions under the relevant provisions and as the person to whom the notice is addressed has or can reasonably obtain, including in particular information—

(a) to enable the Board to determine—

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

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

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

PART II REQUIREMENTS GENERALLY APPLICABLE

7 The provisions of this Part apply in relation to all schemes unless otherwise stated.

8 The scheme must not provide for any person to be eligible to participate in it, that is to say, to obtain and exercise rights under it, or in the case of a profit sharing scheme to have shares appropriated to him, at any time when he has, or has within the preceding 12 months had, a material interest in a close company which is—

(a) a company shares in which, in the case of a profit sharing scheme, are to be appropriated or, in the case of a share option scheme, may be acquired pursuant to the exercise of rights obtained under the scheme; or

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

In determining whether a company is a close company for the purposes of this paragraph, sections 414(1)(a) and 415 shall be disregarded.

8A (1) In the case of a savings-related share option scheme or a profit sharing scheme, the scheme must specify what age is to be the specified age for the purposes of the scheme.

(2) The age specified—

(a) must be the same for men and women, and

(b) must be not less than 60 and not more than 75.

9 (1) A share option scheme must provide for directors and employees to obtain rights to acquire shares (“ scheme shares ”) which satisfy the requirements of paragraphs 10 to 14 below (disregarding paragraph 11A) .

(2) In the case of a profit sharing scheme, the shares to be acquired by the trustees as mentioned in paragraph 30 below (“ scheme shares ”) must satisfy the requirements of paragraphs 10 to 12 and 14 below.

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

(a) the grantor; or

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

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

(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 Scheme shares must be—

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

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

(c) shares in a company which is under the control of a company (other than a company which is, or would if resident in the United Kingdom be, a close company), whose shares are listed on a recognised stock exchange.

11A (1) In the case of a profit sharing scheme, scheme shares must not be shares—

(a) in an employer company, or

(b) in a company that—

(i) has control of an employer company, and

(ii) is under the control of a person or persons within sub-paragraph (2)(b)(i) below in relation to an employer company.

(2) For the purposes of this paragraph a company is “ an employer company ” if—

(a) the business carried on by it consists substantially in the provision of the services of the persons employed by it, and

(b) the majority of those services are provided to—

(i) a person who has, or two or more persons who together have, control of the company, or

(ii) a company associated with the company.

(3) For the purposes of sub-paragraph (2)(b)(ii) above a company shall be treated as associated with another company if both companies are under the control of the same person or persons.

(4) For the purposes of sub-paragraphs (1) to (3) above—

(a) references to a person include a partnership, and

(b) where a partner, alone or together with others, has control of a company, the partnership shall be treated as having like control of that company.

(5) For the purposes of this paragraph the question whether a person controls a company shall be determined in accordance with section 416(2) to (6).

12 (1) Scheme shares must be—

(a) fully paid up;

(b) not redeemable; and

Sub-paragraph (b) above does not apply, in the case of a profit sharing scheme, in relation to shares in a workers’ cooperative.

(1A) Subject to sub-paragraph (1B) below, scheme shares may be subject to—

(a) restrictions which attach to all shares of the same class, or

(b) a restriction authorised by sub-paragraph (2) below.

(1B) In the case of a profit sharing scheme, scheme shares must not be subject to any restrictions affecting the rights attaching to those shares which relate to—

(a) dividends, or

(b) assets on a winding-up of the company,

other than restrictions which attach to all other ordinary shares in the same company.

(2) Except as provided below, the shares may be subject to a restriction imposed by the company’s articles of association—

(a) requiring all shares held by directors or employees of the company or of any other company of which it has control to be disposed of on ceasing to be so held; and

(b) requiring all shares acquired, in pursuance of rights or interests obtained by such directors or employees, by persons who are not (or have ceased to be) such directors or employees to be disposed of when they are acquired.

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

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

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

(4) In the case of a profit sharing scheme, except in relation to redeemable shares in a workers’ cooperative, nothing in sub-paragraph (2) above authorises a restriction which would require a person, before the release date, to dispose of his beneficial interest in shares the ownership of which has not been transferred to him.

13 (1) In determining, in the case of a share option scheme, for the purposes of paragraph 12(1)(c) above whether scheme shares which are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or of any interest in them or of the proceeds of their sale or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantage to him or to a person connected with him.

(2) Sub-paragraph (1) does not apply to so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Rules set out in the Model Code for Securities Transactions by Directors of Listed Companies issued by the Stock Exchange in November 1984.

(3) In the case of schemes other than savings-related share option schemes, sub-paragraph (1) above does not apply in relation to any terms of a loan making provision about how it is to be repaid or the security to be given for it.

14 (1) Except where scheme shares are shares in a company the ordinary share capital of which consists of shares of one class only, the majority of the issued shares of the same class either must be employee-control shares or must be held by persons other than—

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

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

(c) in a case where the shares fall within sub-paragraph (c), but not within sub-paragraph (a), of paragraph 11 above, companies which have control of the company whose shares are in question or of which that company is an associated company.

(2) In its application to a profit sharing scheme, sub-paragraph (1) above shall have effect with the addition after the words “ordinary share capital of which” of the words “ at the time of the acquisition of the shares by the trustees ” .

(3) For the purposes of this paragraph, shares in a company are employee-control shares if—

(a) the persons holding the shares are, by virtue of their holding, together able to control the company; and

(b) those persons are or have been employees or directors of the company or of another company which is under the control of the company.

15 (1) Except in the case of a profit sharing scheme, the scheme may provide that if any company (“ the acquiring company ”)—

(a) obtains control of a company whose shares are scheme shares as a result of making a general offer—

(i) to acquire the whole of the issued ordinary share capital of the company which is made on a condition such that if it is satisfied the person making the offer will have control of the company; or

(ii) to acquire all the shares in the company which are of the same class as the scheme shares;

(b) obtains control of a company whose shares are scheme shares in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986; or

(c) becomes bound or entitled to acquire shares in a company whose shares are scheme shares under sections 428 to 430 of that Act or Articles 421 to 423 of that Order,

any participant in the scheme may at any time within the appropriate period, by agreement with the acquiring company, release his rights under the scheme (in this paragraph referred to as “ the old rights ”) in consideration of the grant to him of rights (in this paragraph referred to as “ the new rights ”) which are equivalent to the old rights but relate to shares in a different company (whether the acquiring company itself or some other company falling within paragraph 10(b) or (c) above).

(2) In sub-paragraph (1) above “ the appropriate period ” means—

(a) in a case falling within paragraph (a), the period of six months beginning with the time when the person making the offer has obtained control of the company and any condition subject to which the offer is made is satisfied;

(b) in a case falling within paragraph (b), the period of six months beginning with the time when the court sanctions the compromise or arrangement; and

(c) in a case falling within paragraph (c), the period during which the acquiring company remains bound or entitled as mentioned in that paragraph.

(3) The new rights shall not be regarded for the purposes of this paragraph as equivalent to the old rights unless—

(a) the shares to which they relate satisfy the conditions specified, in relation to scheme shares, in paragraphs 10 to 14 above; and

(b) the new rights will be exercisable in the same manner as the old rights and subject to the provisions of the scheme as it had effect immediately before the release of the old rights; and

(c) the total market value, immediately before the release, of the shares which were subject to the participant’s old rights is equal to the total market value, immediately after the grant, of the shares in respect of which the new rights are granted to the participant; and

(d) the total amount payable by the participant for the acquisition of shares in pursuance of the new rights is equal to the total amount that would have been payable for the acquisition of shares in pursuance of the old rights.

(4) Where any new rights are granted pursuant to a provision included in a scheme by virtue of this paragraph they shall be regarded—

(a) for the purposes of section 185 and this Schedule; and

(b) for the purposes of the subsequent application (by virtue of a condition complying with sub-paragraph (3)(b) above) of the provisions of the scheme,

as having been granted at the time when the corresponding old rights were granted.

(5) Where a scheme which was approved before 1st August 1987 is altered before 1st August 1989 so as to include such a provision as is mentioned above (“ an exchange provision ”), the scheme as altered may by virtue of this and the following sub-paragraphs apply that provision to rights obtained under the scheme before the date on which the alteration takes effect.

(6) If an exchange provision is applied as mentioned in sub-paragraph (5) above in a case where, on or after 17th March 1987 but before the date on which the alteration takes effect, an event has occurred by reason of which a person holding rights under the scheme would be able to take advantage of the exchange provision—

(a) the scheme may permit a person who held rights under the scheme immediately before that event to take advantage of the exchange provision; and

(b) in a case where rights then held would otherwise, by reason of the event, have ceased to be exercisable, the scheme may provide that the exchange provision shall apply as if the rights were still exercisable.

(7) The application of an exchange provision as mentioned in sub-paragraph (5) or (6) above shall not itself be regarded for the purposes of this Schedule as the acquisition of a right.

(8) Sub-paragraphs (5) and (6) above have effect subject to paragraph 4 above.

30 (1) The scheme must provide for the establishment of a body of persons resident in the United Kingdom (“ the trustees ”)—

(a) who, out of moneys paid to them by the grantor or, in the case of a group scheme, a participating company, are required by the scheme to acquire shares in respect of which the conditions in paragraphs 10 to 12 and 14 above are fulfilled; and

(b) who are under a duty to appropriate shares acquired by them to individuals who participate in the scheme, not being individuals who are ineligible by virtue of paragraph 8 or 35 of this Schedule; and

(c) whose functions with respect to shares held by them are regulated by a trust which is constituted under the law of a part of the United Kingdom and the terms of which are embodied in an instrument which complies with the provisions of paragraphs 31 to 34 below.

(2) If at any time after the Board have approved the scheme, an alteration is made in the terms of the trust referred to in sub-paragraph (1)(c) above, the approval shall not have effect after the date of the alteration unless the Board have approved the alteration.

(3) The scheme must provide that the total of the initial market values of the shares appropriated to any one participant in a year of assessment will not exceed the relevant amount.

(4) In this Part of this Schedule “ initial market value ”, in relation to a participant’s shares, means the market value of those shares determined—

(a) except where paragraph (b) below applies, on the date on which the shares were appropriated to him; and

(b) if the Board and the trustees agree in writing, on or by reference to such earlier date or dates as may be provided for in the agreement.

31 The trust instrument shall provide that, as soon as practicable after any shares have been appropriated to a participant, the trustees will give him notice of the appropriation—

(a) specifying the number and description of those shares; and

(b) stating their initial market value.

32 (1) The trust instrument must contain a provision prohibiting the trustees from disposing of any shares, except as mentioned in paragraph 1(1)(a), (b) , (c) or (cc) of Schedule 10, during the period of retention (whether by transfer to the participant or otherwise).

(2) The trust instrument must contain a provision prohibiting the trustees from disposing of any shares after the end of the period of retention and before the release date except—

(a) pursuant to a direction given by or on behalf of the participant or any person in whom the beneficial interest in his shares is for the time being vested; and

(b) by a transaction which would not involve a breach of the participant’s obligations under paragraph 2(2)(c) or (d) above.

33 The trust instrument must contain a provision requiring the trustees—

(a) subject to their obligations under paragraph 7 of Schedule 10 and to any such direction as is mentioned in paragraph 4(2) of that Schedule to pay over to the participant any money or money’s worth received by them in respect of or by reference to any of his shares other than money’s worth consisting of new shares within the meaning of paragraph 5 of that Schedule; and

(b) to deal only pursuant to a direction given by or on behalf of the participant or any person in whom the beneficial interest in his shares is for the time being vested with any right conferred in respect of any of his shares to be allotted other shares, securities or rights of any description.

34 The trust instrument must impose an obligation on the trustees—

(a) to maintain such records as may be necessary to enable the trustees to carry out their obligations under paragraph 7 of Schedule 10; and

(b) where the participant becomes liable to income tax under Schedule E by reason of the occurrence of any event, to inform him of any facts relevant to determining that liability.

35 (1) An individual shall not be eligible to have shares appropriated to him under the scheme at any time unless he is at that time or was within the preceding 18 months a director or employee of the grantor or, in the case of a group scheme, of a participating company.

(2) An individual shall not be eligible to have shares appropriated to him under the scheme at any time if in that year of assessment shares have been appropriated to him under another approved scheme established by the grantor or by—

(a) a company which controls or is controlled by the grantor or which is controlled by a company which also controls the grantor, or

(b) a company which is a member of a consortium owning the grantor or which is owned in part by the grantor as a member of a consortium.

36 (1) Subject to paragraphs 8 and 35 above, every person who at any time—

(a) is an employee or a full-time director of the grantor or, in the case of a group scheme, a participating company, and

(b) has been such an employee or director at all times during a qualifying period, not exceeding five years, ending at that time, and

must then be eligible (subject to paragraphs 8 and 35 of this Schedule) to participate in the scheme on similar terms and those who do participate must actually do so on similar terms.

(2) For the purposes of sub-paragraph (1) above, the fact that the number of shares to be appropriated to the participants in a scheme varies by reference to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that they are not eligible to participate in the scheme on similar terms or do not actually do so.

PART VI MATERIAL INTEREST TEST

Interests under trusts

37 (1) This paragraph applies in a case where—

(a) the individual (“ the beneficiary ”) was one of the objects of a discretionary trust; and

(b) the property subject to the trust at any time consisted of or included any shares or obligations of the company.

(2) If neither the beneficiary nor any relevant associate of his had received any benefit under the discretionary trust before 14th November 1986, then, as respects any time before that date, the trustees of the settlement concerned shall not be regarded, by reason only of the matters referred to in sub-paragraph (1) above, as having been associates (as defined in section 417(3) and (4)) of the beneficiary.

(3) If, on or after 14th November 1986—

(a) the beneficiary ceases to be eligible to benefit under the discretionary trust by reason of—

(i) an irrevocable disclaimer or release executed by him under seal; or

(ii) the irrevocable exercise by the trustees of a power to exclude him from the objects of the trust; and

(b) immediately after he so ceases, no relevant associate of his is interested in the shares or obligations of the company which are subject to the trust; and

(c) during the period of 12 months ending with the date when the beneficiary so ceases, neither the beneficiary nor any relevant associate of his received any benefit under the trust,

the beneficiary shall not be regarded, by reason only of the matters referred to in sub-paragraph (1) above, as having been interested in the shares or obligations of the company as mentioned in section 417(3)(c) at any time during the period of 12 months referred to in paragraph (c) above.

(4) In sub-paragraphs (2) and (3) above “ relevant associate ” has the meaning given to “ associate ” by subsection (3) of section 417 but with the omission of paragraph (c) of that subsection.

(5) Sub-paragraph (3)(a)(i) above, in its application to Scotland, shall be construed as if the words “under seal” were omitted.

Options etc.

38 (1) For the purposes of section 187(3)(a) a right to acquire shares (however arising) shall be taken to be a right to control them.

(2) Any reference in sub-paragraph (3) below to the shares attributed to an individual is a reference to the shares which, in accordance with section 187(3)(a), fall to be brought into account in his case to determine whether their number exceeds a particular percentage of the company’s ordinary share capital.

(3) In any case where—

(a) the shares attributed to an individual consist of or include shares which he or any other person has a right to acquire; and

(b) the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company is contractually bound to issue in the event of the exercise of the right;

then, in determining at any time prior to the exercise of that right whether the number of shares attributed to the individual exceeds a particular percentage of the ordinary share capital of the company, that ordinary share capital shall be taken to be increased by the number of unissued shares referred to in paragraph (b) above.

(4) This paragraph has effect as respects any time after 5th April 1987.

39 In applying section 187(3), as respects any time before or after the passing of this Act, there shall be disregarded—

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

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

Shares subject to an employee benefit trust

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

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

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

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

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

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

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

Limitations on contractual obligations of participants

1 (1) Any obligation placed on the participant by virtue of paragraph 2(2) of Schedule 9 shall not prevent the participant from—

(a) directing the trustees to accept an offer for any of his shares (“ the original shares ”) if the acceptance or agreement will result in a new holding being equated with the original shares for the purposes of capital gains tax; or

(b) directing the trustees to agree to a transaction affecting his shares or such of them as are of a particular class, if the transaction would be entered into pursuant to a compromise, arrangement or scheme applicable to or affecting—

(i) all the ordinary share capital of the company in question or, as the case may be, all the shares of the class in question; or

(ii) all the shares, or all the shares of the class in question, which are held by a class of shareholders identified otherwise than by reference to their employment or their participation in an approved scheme; or

(c) directing the trustees to accept an offer of cash, with or without other assets, for his shares if the offer forms part of a general offer which is made to holders of shares of the same class as his or of shares in the same company and which is made in the first instance on a condition such that if it is satisfied the person making the offer will have control of that company, within the meaning of section 416; or

(cc) directing the trustees to accept an offer of a qualifying corporate bond, whether alone or with cash or other assets or both, for his shares if the offer forms part of a general offer which is made as mentioned in paragraph (c) above; or

(d) agreeing after the expiry of the period of retention to sell the beneficial interest in his shares to the trustees for the same consideration as, in accordance with sub-paragraph (d) of paragraph 2(2) of Schedule 9, would be required to be obtained for the shares themselves.

(2) No obligation placed on the participant by virtue of paragraph 2(2)(c) of Schedule 9 shall be construed as binding his personal representatives to pay any sum to the trustees.

(3) If, in breach of his obligation under paragraph 2(2)(b) of Schedule 9 a participant assigns, charges or otherwise disposes of the beneficial interest in any of his shares, then, as respects those shares, he shall be treated for the purposes of the relevant provisions as if at the time they were appropriated to him he was ineligible to participate in the scheme; and paragraph 6 below shall apply accordingly.

(4) In sub-paragraph (1)(cc) above “ qualifying corporate bond ” shall be construed in accordance with section 117 of the 1992 Act.

The period of retention

2 For the purposes of any of the relevant provisions, “ the period of retention ”, in relation to any of a participant’s shares, means the period beginning on the date on which they are appropriated to him and ending on the second anniversary of that date or, if it is earlier—

(a) the date on which the participant ceases to be a director or employee of the grantor or, in the case of a group scheme, a participating company by reason of injury or disability or on account of his being dismissed by reason of redundancy, within the meaning of the Employment Rights Act 1996 or the Employment Rights (Northern Ireland) Order 1996 ; or

(b) the date on which the participant reaches the relevant age ; or

(d) in a case where the participant’s shares are redeemable shares in a workers’ cooperative, the date on which the participant ceases to be employed by, or by a subsidiary of, the cooperative.

For the purposes of sub-paragraph (a) above, in the case of a group scheme, the participant shall not be treated as ceasing to be a director or employee of a participating company until such time as he is no longer a director or employee of any of the participating companies.
In this paragraph, the reference to the relevant age is a reference, in the case of a scheme approved before the day on which the Finance Act 1991 was passed, in the case of a man, to the age of 65, and in the case of a woman, to the age of 60 and, in the case of a scheme approved on or after that day, to the specified age.

The appropriate percentage

3 (1) For the purposes of any of the relevant provisions under which an amount counts as employment income of an individual by reason of the occurrence of an event relating to any of his shares, the “appropriate percentage” in relation to those shares is 100 per cent., unless sub-paragraph (2) below applies.

(2) Where the individual—

(a) ceases to be a director or employee of the grantor or, in the case of a group scheme, a participating company as mentioned in paragraph 2(a) above, or

(b) reaches the relevant age,

before the event occurs, the “appropriate percentage” is 50 per cent., unless paragraph 6(4) below applies.

3A (1) In paragraph 3 above the reference to the relevant age shall be construed as follows.

(2) Where the scheme is approved before 25th July 1991 and the event occurs before 30th November 1993, the relevant age is

(a) in the case of a man, 65, and

(b) in the case of a woman, 60.

(3) Where—

(a) the scheme is approved before 25th July 1991,

(b) the event occurs on or after 30th November 1993,

(d) the reference to that age is incorporated in the definition by virtue of an alteration approved by the Board under paragraph 4 of Schedule 9 before the event occurs,

the relevant age is 60.

(4) Where—

(a) the scheme is approved before 25th July 1991,

(b) the event occurs on or after 30th November 1993, and

the relevant age is in the case of a man, 65, and in the case of a woman, 60.

(5) Where the scheme is approved on or after 25th July 1991, the relevant age is the specified age.

Capital receipts

4 (1) Money or money’s worth is not a capital receipt for the purposes of section 186(3) if or, as the case may be, to the extent that—

(a) it constitutes income in the hands of the recipient for the purposes of income tax; or

(b) it consists of the proceeds of a disposal falling within section 186(4); or

(2) If, pursuant to a direction given by or on behalf of the participant or any person in whom the beneficial interest in the participant’s shares is for the time being vested, the trustees—

(a) dispose of some of the rights arising under a rights issue, as defined in section 186(8), and

(b) use the proceeds of that disposal to exercise other such rights,

the money or money’s worth which constitutes the proceeds of that disposal is not a capital receipt for the purposes of section 186(3).

(3) If, apart from this sub-paragraph, the amount or value of a capital receipt would exceed the sum which, immediately before the entitlement to the receipt arose, was the locked-in value of the shares to which the receipt is referable, section 186(3) shall have effect as if the amount or value of the receipt were equal to that locked-in value.

(4) Section 186(3) does not apply in relation to a capital receipt if the entitlement to it arises after the death of the participant to whose shares it is referable.

Company reconstructions

5 (1) This paragraph applies where there occurs in relation to any of a participant’s shares (“ the original holding ”) a transaction which results in a new holding being equated with the original holding for the purposes of capital gains tax; and any such transaction is referred to below as a “ company reconstruction ”.

(2) Where an issue of shares of any of the following descriptions (in respect of which a charge to income tax arises) is made as part of a company reconstruction, those shares shall be treated for the purposes of this paragraph as not forming part of the new holding, that is to say—

(a) redeemable shares or securities issued as mentioned in condition C or D in section 1000(1) of CTA 2010 ;

(b) share capital issued in circumstances such that section 1022 of CTA 2010 applies; and

(3) In this paragraph—

“ corresponding shares ”, in relation to any new shares, means those shares in respect of which the new shares are issued or which the new shares otherwise represent;
“ new shares ” means shares comprised in the new holding which were issued in respect of, or otherwise represent, shares comprised in the original holding; and
“ original holding ” has the meaning given by sub-paragraph (1) above.

(4) Subject to the following provisions of this paragraph, in relation to a profit sharing scheme, references in the relevant provisions to a participant’s shares shall be construed, after the time of the company reconstruction, as being or, as the case may be, as including references to any new shares, and for the purposes of the relevant provisions—

(a) a company reconstruction shall be treated as not involving a disposal of shares comprised in the original holding;

(b) the date on which any new shares are to be treated as having been appropriated to the participant shall be that on which the corresponding shares were appropriated; and

(c) the conditions in paragraphs 10 to 12 and 14 of Schedule 9 shall be treated as fulfilled with respect to any new shares if they were (or were treated as) fulfilled with respect to the corresponding shares.

(5) In relation to shares comprised in the new holding, section 186(5) shall apply as if the references in that subsection to the initial market value of the shares were references to their locked-in value immediately after the company reconstruction, which shall be determined as follows—

(a) ascertain the aggregate amount of locked-in value immediately before the reconstruction of those shares comprised in the original holding which had at that time the same locked-in value; and

(b) distribute that amount pro rata among—

(i) such of those shares as remain in the new holding, and

(ii) any new shares in relation to which those shares are the corresponding shares, according to their market value immediately after the date of their reconstruction;

and section 186(5)(a) shall apply only to capital receipts after the date of the reconstruction.

(6) For the purposes of the relevant provisions if, as part of a company reconstruction, trustees become entitled to a capital receipt, their entitlement to the capital receipt shall be taken to arise before the new holding comes into being and, for the purposes of sub-paragraph (5) above, before the date on which the locked-in value of any shares comprised in the original holding falls to be ascertained.

(7) In the context of a new holding, any reference in this paragraph to shares includes securities and rights of any description which form part of the new holding for the purposes of Chapter II of Part IV of the 1992 Act.

5A (1) Paragraph 5(2) to (6) above apply where there occurs in relation to any of a participant’s shares (“ the original holding ”) a relevant transaction which would result in a new holding being equated with the original holding for the purposes of capital gains tax, were it not for the fact that what would be the new holding consists of or includes a qualifying corporate bond; and “ relevant transaction ” here means a transaction mentioned in Chapter II of Part IV of the 1992 Act.

(2) In paragraph 5(2) to (6) above as applied by this paragraph—

(a) references to a company reconstruction are to the transaction referred to in sub-paragraph (1) above;

(b) references to the new holding are to what would be the new holding were it not for the fact mentioned in sub-paragraph (1) above;

(c) references to the original holding shall be construed in accordance with sub-paragraph (1) above (and not paragraph 5(1));

(d) references to shares, in the context of the new holding, include securities and rights of any description which form part of the new holding.

(3) In sub-paragraph (1) above “ qualifying corporate bond ” shall be construed in accordance with section 117 of the 1992 Act.

Excess or unauthorised shares

6 (1) This paragraph applies in any case where—

(a) the total amount of the initial market value of all the shares which are appropriated to an individual in any one year of assessment (whether under a single approved profit sharing scheme or under two or more such schemes) exceeds the relevant amount; or

(b) the trustees of an approved profit sharing scheme appropriate shares to an individual at a time when he is ineligible to participate in the scheme by virtue of paragraph 8 or 35 of Schedule 9.

(2) In this paragraph—

“ excess shares ” means any share which caused the relevant amount to be exceeded and any share appropriated after that amount was exceeded; and
“ unauthorised shares ” means any share appropriated as mentioned in sub-paragraph (1)(b) above.

(3) For the purposes of sub-paragraph (1)(a) above, if a number of shares is appropriated to an individual at the same time under two or more approved profit sharing schemes, the same proportion of the shares appropriated at that time under each scheme shall be regarded as being appropriated before the relevant amount is exceeded.

(4) For the purposes of any of the relevant provisions under which an amount counts as employment income of an individual by reason of the occurrence of an event relating to any of his shares—

(a) the appropriate percentage in relation to excess or unauthorised shares shall in every case be 100 per cent.; and

(b) without prejudice to section 187(8), the event shall be treated as relating to shares which are not excess or unauthorised shares before shares which are.

(5) Excess or unauthorised shares which have not been disposed of before the release date or, if it is earlier, the date of the death of the participant whose shares they are, shall be treated for the purposes of the relevant provisions as having been disposed of by the trustees immediately before the release date or, as the case may require, the date of the participant’s death, for a consideration equal to their market value at that time.

(6) The locked-in value at any time of any excess or unauthorised shares shall be their market value at that time.

(7) Where there has been a company reconstruction to which paragraph 5 above applies, a new share (within the meaning of that paragraph) shall be treated as an excess or unauthorised share if the corresponding share (within the meaning of that paragraph) or, if there was more than one corresponding share, each of them was an excess or unauthorised share.

P.A.Y.E. deduction of tax

7 (1) Subject to sub-paragraphs (4) and (5) below, where the trustees of an approved profit sharing scheme receive a sum of money which constitutes (or forms part of)—

(a) the proceeds of a disposal of shares falling within section 186(4), or

(b) a capital receipt,

in respect of which an amount counts as employment income of the participant in accordance with section 186, the trustees shall pay out of that sum of money to the company specified in sub-paragraph (3) below an amount equal to that on which income tax is so payable; and the company shall then pay over that amount to the participant but in so doing shall make a P.A.Y.E. deduction.

(2) Where a participant disposes of his beneficial interest in any of his shares to the trustees of the scheme and the trustees are deemed by virtue of section 186(9) to have disposed of the shares in question, this paragraph shall apply as if the consideration payable by the trustees to the participant on the disposal had been received by the trustees as the proceeds of disposal of shares falling within section 186(4).

(3) The company to which the payment mentioned in sub-paragraph (1) above is to be made is the company—

(a) of which the participant is an employee or director at the time the trustees receive the sum of money referred to in that sub-paragraph, and

(b) whose employees are at that time eligible (subject to the terms of the scheme and Schedule 9) to be participants in the approved profit sharing scheme concerned,

and if there is more than one company which falls within paragraphs (a) and (b) above, such one of those companies as the Board may direct.

(4) Where the trustees of an approved profit sharing scheme receive a sum of money to which sub-paragraph (1) above applies but—

(a) there is no company which falls within paragraphs (a) and (b) of sub-paragraph (3) above, or

(b) the Board is of opinion that it is impracticable for the company which falls within those paragraphs (or, as the case may be, any of them) to make a P.A.Y.E. deduction and accordingly direct that this sub-paragraph shall apply,

then, in paying over to the participant the proceeds of the disposal or the capital receipt, the trustees shall make a P.A.Y.E. deduction in respect of an amount equal to that on which income tax is payable as mentioned in sub-paragraph (1) above as if the participant were a former employee of the trustees.

(5) Where the trustees of an approved profit sharing scheme receive a sum of money to which sub-paragraph (1) above applies and the Board direct that this sub-paragraph shall apply—

(a) the trustees shall make the payment mentioned in that sub-paragraph to the company specified in the Board’s direction; and

(b) that company shall pay over that amount to the participant but in so doing shall make a P.A.Y.E. deduction, and for that purpose if the participant is not an employee of that company he shall be treated as a former employee;

but no such direction shall be given except with the consent of the trustees, the company or companies (if any) specified in sub-paragraph (3) above and the company specified in the direction.

(6) Where, in accordance with this paragraph any person is required to make a P.A.Y.E. deduction in respect of any amount, that amount shall be treated for the purposes of section 684 of ITEPA 2003 (PAYE regulations) and PAYE regulations as PAYE income payable to the recipient , and, accordingly, such deduction shall be made as is required by those regulations.

(7) Where, in connection with a transfer of a participant’s shares to which sub-paragraph (c) of paragraph 2(2) of Schedule 9 applies, the trustees receive such a sum as is referred to in that sub-paragraph, that sum shall be treated for the purposes of the Income Tax Acts—

(a) as a sum deducted by the trustees pursuant to a requirement to make a P.A.Y.E. deduction under sub-paragraph (4) above; and

(b) as referable to the income tax . . . which, as a result of the transfer, is charged on the participant by virtue of section 186(4).

(8) Unless the Board otherwise direct, in the application of this paragraph to a sum of money which constitutes or forms part of the proceeds of a disposal of, or a capital receipt referable to, excess or unauthorised shares (within the meaning of paragraph 6 above), the trustees shall determine the amount of the payment mentioned in sub-paragraph (1) above or, as the case may be, the amount of the P.A.Y.E. deduction to be made under sub-paragraph (4) above as if the shares were not excess or unauthorised shares.

Schedule 11

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SCHEDULE 11A

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SCHEDULE 12

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SCHEDULE 12AA MILEAGE ALLOWANCES: INTERPRETATION

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Schedule 12A Ordinary commuting and private travel

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SCHEDULE 13

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SCHEDULE 13A Surrenders of advance corporation tax

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Schedule 13B Children’s Tax Credit

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Section 266(12).

SCHEDULE 14 PROVISIONS ANCILLARY TO SECTION 266

PART I MODIFICATION OF SECTION 266 IN CERTAIN CASES

Spouses and civil partners

1 (1) In section 266—

(a) references to an individual's spouse include any person who—

(i) was that individual's spouse at the time the insurance or contract was made, or

(ii) became that individual's spouse after the insurance or contract was made,

unless the marriage was dissolved before 6th April 1979, and

(b) references to an individual's civil partner include any person who—

(i) was that individual's civil partner at the time the insurance or contract was made, or

(ii) became that individual's civil partner after the insurance or contract was made.

(1A) But an individual is entitled to relief by virtue of sub-paragraph (1)(a)(ii) or (b)(ii) only in respect of premiums payable after the date on which the person in question became that individual's spouse or civil partner.

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

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

Premiums payable to friendly societies and industrial assurance companies

2 (1) This paragraph applies to—

(a) a policy issued in the course of an industrial assurance business; and

(b) a policy issued by a friendly society in the course of tax exempt life or endowment business (as defined in section 466).

(1A) In sub-paragraph (1)(a) “ industrial assurance business ” means any industrial assurance business within the meaning given by—

(a) section 1(2) of the Industrial Assurance Act 1923, or

(b) Article 3(1) of the Industrial Assurance (Northern Ireland) Order 1979,

which was carried on before 1 December 2001.

(2) Subject to paragraph 3(2) below, if a policy to which this paragraph applies was issued before the passing of the Finance Act 1976 (29th July 1976), section 266 shall have effect in relation to it as if subsections (2)(b), (3)(a), (b) and (d) were omitted; and if a policy to which this paragraph applies was issued after the passing of that Act, subsection (2)(b) of that section shall have effect in relation to it as if it permitted the insurance to be on the life of the individual’s parent or grandparent or, subject to sub-paragraph (3) below, on the life of the individual’s child or grandchild.

(3) Relief may be given in respect of premiums under a policy of insurance on the life of an individual’s child or grandchild which was or is issued after the passing of the Finance Act 1976 (29th July 1976), as if subsection (3)(d) of section 266 were omitted, but may be given only if the annual amount of the premiums, together with that of any relevant premiums, does not exceed £52 if the policy was issued in respect of an insurance made before 25th March 1982 or £64 in any other case.

(4) For the purposes of sub-paragraph (3) above, a relevant premium, in relation to an insurance made at any time on the life of an individual’s child or grandchild, is any premium under a policy of insurance on the same life, where the insurance is made at the same time or earlier, whether it is made by the individual or any other person.

(5) In this paragraph “ child ” includes a step-child and an illegitimate child whose parents have married each other after his birth, and “ grandchild ”, “ parent ” and “ grandparent ” have corresponding meanings.

3 (1) Where a policy is issued or a contract is made by a friendly society or a policy to which paragraph 2 above applies is issued by an industrial assurance company, section 266(4), (5) and (8) shall apply in relation to premiums payable under the policy or contract subject to the following provisions of this paragraph.

(2) References to the deductions authorised under section 266(5) shall be construed as including references to any amount retained by or refunded to the person paying the premium under any scheme made by the society or company in accordance with regulations made under this paragraph.

(3) The appropriate authority may make regulations authorising—

(a) the adoption by friendly societies and industrial assurance companies of any prescribed scheme for securing that in the case of policies or contracts to which the scheme applies amounts equal to 12.5 per cent. of the premiums payable are retained by or refunded to the person paying the premiums or that, in the case of such policies or contracts issued or made before 6th April 1979, the amounts expressed as the amounts of the premiums payable are treated as amounts arrived at by deducting 12.5 per cent. from the amounts payable and that the amounts of the capital sums assured or guaranteed are treated as correspondingly increased; or

(b) the adoption by any such society or company of any special scheme for that purpose which may, in such circumstances as may be prescribed, be approved by the appropriate authority.

(4) Increases treated as made in pursuance of regulations under this paragraph shall not be treated as variations of a policy or contract and shall be disregarded for the purposes of paragraph 2(3) above, sections 268(6), 460, 461(1) and 464 of, and paragraph 7 of Schedule 15 to, this Act . . . .

(5) The regulations may include such adaptations and modifications of the enactments relating to friendly societies or industrial assurance companies and such other incidental and supplementary provisions as appear to the appropriate authority necessary or expedient for the purpose of enabling such societies or companies to adopt the schemes authorised by the regulations.

(6) Subsections (4), (5) and (7) to (11) of section 6 of the Decimal Currency Act 1969 shall, with the necessary modifications, apply in relation to regulations made under this paragraph.

PART II SUPPLEMENTARY PROVISIONS AS TO RELIEF UNDER SECTION 266

4 (1) Where it appears to the Board that the relief (if any) to which a person is entitled under section 266 has been exceeded or might be exceeded unless the premiums payable by him under any policy or contract were paid in full, they may, by notice to that person and to the person to whom the payments are made, exclude the application of subsection (5) of that section in relation to any payments due or made after such date as may be specified in the notice and before such date as may be specified in a further notice to those persons.

(2) Where the application of section 266(5) is so excluded in relation to any payments, the relief (if any) to which the person by whom the payments are made is entitled under section 266 shall be given to him under paragraph 6 below.

5 Where a person is entitled to relief under section 266 in respect of a payment to which section 386 of ITEPA 2003 (payments to non-approved retirement benefits schemes) applies, section 266(5) shall not apply but the like relief shall be given to him under paragraph 6 below.

6 (1) Where in any year of assessment the relief to which a person is entitled under section 266 . . . has not been fully given in accordance with that section and the preceding provisions of this Schedule, he may claim relief for the difference, and relief for the difference shall then be given by a payment made by the Board or by discharge or repayment of tax or partly in one such manner and partly in another; and where relief so given to any person exceeds that to which he is entitled under section 266, he shall be liable to make good the excess and an inspector may make such assessments as may in his judgment be required for recovering the excess.

(2) The Management Act shall apply to any assessment under this paragraph as if it were an assessment to tax for the year of assessment in which the relief was given . . . .

7 (1) The Board may make regulations for carrying into effect section 266(4), (5), (8) and (9) and the preceding provisions of this Schedule and paragraphs 9 and 10 of Schedule 15 (“ the relevant provisions ”).

(2) Regulations under this paragraph may, without prejudice to the generality of sub-paragraph (1) above, provide—

(a) for the furnishing of such information by persons by whom premiums are payable as may be necessary for determining whether they are entitled to make deductions under section 266(5) and for excluding the operation of that subsection in relation to payments made by persons who fail to comply with the regulations;

(b) for rounding to a multiple of one penny any payment which, after a deduction authorised under section 266(5), is not such a multiple;

(d) for the furnishing of such information by persons by or to whom premiums are payable as appears to the Board necessary for deciding such claims and for exercising their powers under paragraph 4 or 6 above; and

(e) for requiring persons to whom premiums are paid to make available for inspection by an officer authorised by the Board such books and other documents in their possession or under their control as may reasonably be required for the purposes of determining whether any information given by those persons for the purposes of the relevant provisions is correct and complete.

(3) The following provisions of the Management Act, that is to say—

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

(b) section 30 (recovery of tax repaid in consequence of fraud or negligence etc.) apart from subsection (1B) ;

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

shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable by virtue of section 266(5)(b) but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as respects a chargeable period as a relief which was not due.

(4) In the application of section 86 of the Management Act by virtue of sub-paragraph (3) above in relation to sums due and payable by virtue of an assessment made for the whole or part of a year of assessment (“the relevant year of assessment”) under section 29(1)(c) or 30 of that Act, as applied by that sub-paragraph, the relevant date—

(a) is 1st January in the relevant year of assessment in a case where the person falling within section 266(5)(b) has made a relevant interim claim; and

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

(i) 1st January in the relevant year of assessment; or

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

(5) In this paragraph—

“ financial year ”, in relation to any person, means a financial year of that person for the purposes of the relevant regulations;
“ interim claim ” means an interim claim within the meaning of the relevant regulations;
“ relevant interim claim ” means, in relation to an assessment made for a period coterminous with, or falling wholly within, a person’s financial year, an interim claim made for a period falling wholly or partly within that financial year;
“ the relevant regulations ” means regulations made under sub-paragraph (1) above.

8 (1) A policy of life insurance issued in respect of an insurance made on or before 19th March 1968 shall be treated for the purposes of section 266(3)(b) as issued in respect of one made after that date if varied after that date so as to increase the benefits secured or to extend the term of the insurance.

(2) A variation effected before the end of the year 1968 shall be disregarded for the purposes of sub-paragraph (1) above if its only effect was to bring into conformity with paragraph 2 of Schedule 9 to the Finance Act 1968 (qualifying conditions for endowment policies, and now re-enacted as paragraph 2 of Schedule 15 to this Act) a policy previously conforming therewith except as respects the amount guaranteed on death, and no increase was made in the premiums payable under the policy.

(3) A policy which was issued in the course of industrial assurance business in respect of an insurance made after 13th March 1984 shall be treated for the purposes of section 266(3)(c) and this paragraph as issued in respect of an insurance made on or before that date if—

(a) the proposal form for the policy was completed on or before that date; and

(b) on or before 31st March 1984 the policy was prepared for issue by the company or society concerned; and

(c) on or before 31st March 1984 and in accordance with the normal business practice of the company or society a permanent record of the preparation of the policy was made in any book or by any other means kept or instituted by the company or society for the purpose.

(3A) In sub-paragraph (3) “ industrial assurance business ” means any industrial assurance business within the meaning given by—

(a) section 1(2) of the Industrial Assurance Act 1923, or

(b) Article 3(1) of the Industrial Assurance (Northern Ireland) Order 1979,

which was carried on before 1 December 2001.

(4) Subject to sub-paragraph (8) below, for the purposes of section 266(3)(c) a policy of life insurance which was issued in respect of an insurance made on or before 13th March 1984 shall be treated as issued in respect of an insurance made after that date if the policy is varied after that date so as to increase the benefits secured or to extend the term of the insurance.

(5) If a policy of life insurance which was issued as mentioned in sub-paragraph (4) above confers on the person to whom it was issued an option to have another policy substituted for it or to have any of its terms changed, then, for the purposes of that sub-paragraph and section 266(3)(c), any change in the terms of the policy which is made in pursuance of the option shall be deemed to be a variation of the policy.

(6) In any case where—

(a) one policy is replaced by another in such circumstances that the provisions of paragraph 20 of Schedule 15 apply; and

(b) the earlier policy was issued in respect of an insurance made on or before 13th March 1984; and

(c) the later policy confers on the life or lives assured thereby benefits which are substantially equivalent to those which would have been enjoyed by the life or lives assured under the earlier policy, if that policy had continued in force;

then, for the purposes of section 266(3)(c), the insurance in respect of which the later policy is issued shall be deemed to have been made before 13th March 1984; and in this sub-paragraph “ the earlier policy ” and “ the later policy ” have the same meaning as in paragraph 20 of Schedule 15.

(7) In any case where—

(a) there is a substitution of policies falling within paragraph 25(1) or (3) of Schedule 15; and

(b) the old policy was issued in respect of an insurance made on or before 13th March 1984;

then, for the purposes of section 266(3)(c), the insurance in respect of which the new policy is issued shall be deemed to have been made before 13th March 1984; and in this sub-paragraph “ the old policy ” and “ the new policy ” have the same meaning as in paragraph 17 of Schedule 15.

(8) Sub-paragraph (4) above does not apply in the case of a variation so as to increase the benefits secured, if the variation is made—

(a) on or after such day as the Board may by order appoint, and

(b) in consideration of a change in the method of payment of premiums from collection by a person collecting premiums from house to house to payment by a different method.

Section 267.

SCHEDULE 15 QUALIFYING POLICIES

PART A1 Premium limit for qualifying policies

Premium limit for qualifying policies to apply from 6 April 2013

A1 (1) Sub-paragraph (2) applies if—

(a) an event falling within sub-paragraph (3) occurs,

(b) apart from sub-paragraph (2), the policy to which the event relates would be a qualifying policy after the event, and

(2) That policy is not to be a qualifying policy after the event.

(3) The events falling within this sub-paragraph are—

(a) the issue of a policy in respect of an insurance made on or after 6 April 2013;

(b) the variation of a policy on or after 6 April 2013 where as a result of the variation—

(i) the period over which premiums are payable under the policy is or could be lengthened, or

(ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both;

(c) the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) below;

(d) a deceased beneficiary event on or after 6 April 2013;

(e) the conditions in paragraph 24(3) below being fulfilled for the first time in respect of a new non-resident policy where—

(i) the conditions are fulfilled for the first time on or after 6 April 2013, and

(ii) but for the conditions being fulfilled, the policy could not be a qualifying policy because of paragraph 24(2).

(4) An event does not fall within sub-paragraph (3) if—

(a) the policy to which the event relates is—

(i) a protected policy,

(ii) a restricted relief qualifying policy, or

(iii) a pure protection policy,

(b) the event is the issue of a policy which is a new policy in relation to an earlier policy where—

(i) the new policy is issued in substitution for the earlier policy (and not on its maturity), and

(ii) the life assured under the new policy is different to the life assured under the earlier policy but that is the only difference to what the position would have been had the earlier policy continued to run,

(c) paragraph 20ZA below applies to a policy and the event is the reinstatement or replacement of the policy as mentioned in paragraph 20ZA(4),

(d) the event is the issue or variation of a policy in relation to which paragraph 29 of Schedule 39 to the Finance Act 2012 applies, or

(e) the event is an assignment falling within paragraph B2(3)(e) below where the assignment is a mortgage endowment assignment.

(5) In sub-paragraph (3)(b)(ii) “ relevant period ” means any period of 12 months beginning at or after the time of the variation.

(6) A variation is to be ignored for the purposes of sub-paragraph (3)(b) if its effect is nullified before the end of the period of 3 months after the day on which the variation occurs.

(7) Sub-paragraph (4)(a)(i) does not apply in the case of an event mentioned in sub-paragraph (3)(e).

(8) Sub-paragraph (4)(a)(ii) does not apply in the case of—

(a) an event mentioned in sub-paragraph (3)(c) or (d) occurring in relation to a restricted relief qualifying policy (“the assigned policy”),

(b) any subsequent event relating to the assigned policy, or

(i) a later policy which is a new policy in relation to the assigned policy, or

(ii) any policy which is a new policy in relation to the later policy,

and so on.

(9) In the case of an event mentioned in sub-paragraph (3)(b), sub-paragraph (4)(a)(iii) applies only if the policy is a pure protection policy both before and after the variation.

(10) This paragraph is to be applied after all other provisions of this Schedule relevant to the question of whether a policy is a qualifying policy after an event have been applied.

Restricted relief qualifying policies

A2 (1) Sub-paragraph (2) applies if—

(a) an event falling within sub-paragraph (3) occurs,

(b) the policy to which the event relates is a qualifying policy after the event, and

(2) That policy is to be a restricted relief qualifying policy after the event.

(3) The events falling within this sub-paragraph are—

(a) a premium limit event in relation to a protected policy on or after 21 March 2012;

(b) the issue of a policy as mentioned in paragraph A4(2)(b) below if, assuming that the substitution of the protected policy were instead a variation of that policy, there would be a premium limit event in relation to that policy;

(c) the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a protected policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) below;

(d) a deceased beneficiary event on or after 6 April 2013 where the policy in question is a protected policy;

(e) the issue of a policy in respect of an insurance made on or after 21 March 2012 but before 6 April 2013 otherwise than as mentioned in paragraph A4(2)(b) below;

(f) the variation of a policy, other than a protected policy, on or after 21 March 2012 but before 6 April 2013 where as a result of the variation—

(i) the period over which premiums are payable under the policy is or could be lengthened, or

(ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both;

(g) the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 below being fulfilled for the first time in respect of a new non-resident policy where—

(i) the conditions are fulfilled for the first time on or after 21 March 2012 but before 6 April 2013, and

(ii) but for the conditions being fulfilled, the policy could not be a qualifying policy because of sub-paragraph (2) of paragraph 24.

(4) An event does not fall within sub-paragraph (3) if—

(a) the policy to which the event relates is a pure protection policy,

(b) the event is the issue of a policy which is a new policy in relation to an earlier policy where—

(i) the new policy is issued in substitution for the earlier policy (and not on its maturity), and

(c) paragraph 20ZA below applies to a policy and the event is the reinstatement or replacement of the policy as mentioned in paragraph 20ZA(4),

(d) the event is the issue or variation of a policy in relation to which paragraph 29 of Schedule 39 to the Finance Act 2012 applies, or

(e) the event is an assignment falling within paragraph B2(3)(e) below where the assignment is a mortgage endowment assignment.

(5) In sub-paragraph (3)(f)(ii) “ relevant period ” means any period of 12 months beginning at or after the time of the variation.

(6) A premium limit event or a variation is to be ignored for the purposes of sub-paragraph (3)(a) or (f) if its effect is nullified before 6 July 2013.

(7) In the case of a premium limit event which occurs on or after 6 April 2013, in sub-paragraph (6) the reference to 6 July 2013 is to be read as a reference to the end of the period of 3 months after the day on which the premium limit event occurs.

(8) In the case of an event mentioned in sub-paragraph (3)(a) or (f), sub-paragraph (4)(a) applies only if the policy is a pure protection policy both before and after the premium limit event or variation.

(9) A “premium limit event” occurs in relation to a protected policy if—

(a) the policy is varied or a relevant option is exercised so as to change the terms of the policy, and

(b) as a result of the variation or exercise of the relevant option—

(i) the period over which premiums are payable under the policy is or could be lengthened, or

(ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both.

(10) A “premium limit event” also occurs in relation to a protected policy if on or after 6 April 2013—

(a) the policy is varied or a relevant option is exercised so as to change the terms of the policy, and

(b) as a result of the variation or exercise of the relevant option—

(i) the period over which premiums are payable under the policy is or could be shortened, or

(ii) the total amount of the premiums payable under the policy in any relevant period is or could be decreased,

or both.

(11) In sub-paragraphs (9)(b)(ii) and (10)(b)(ii) “ relevant period ” means any period of 12 months beginning at or after the time of the variation or exercise of the relevant option.

(12) The variation of, or exercise of a relevant option under, a protected policy is not a premium limit event in relation to the policy if—

(a) the policy secures a capital sum payable either—

(i) on survival for a specified term, or

(ii) on earlier death or on earlier death or disability,

(b) the policy is issued and maintained for the sole purpose of ensuring that the borrower under an interest-only mortgage will have sufficient funds to repay the principal lent under the mortgage, and

(13) In sub-paragraph (3)(g) references to paragraph 24 below are to that paragraph as it has effect before the appointed date for the purposes of section 55 of the Finance Act 1995.

(14) A qualifying policy which is a new policy in relation to an earlier policy is a restricted relief qualifying policy if the earlier policy is a restricted relief qualifying policy.

(15) A policy which is a restricted relief qualifying policy remains a restricted relief qualifying policy so long as it is a qualifying policy.

(16) Paragraph A1 above is to be ignored in determining for the purposes of sub-paragraph (14) or (15) if a policy is a qualifying policy. This is subject to paragraph A1(8).

(17) For further provision about restricted relief qualifying policies, see sections 463A to 463D of ITTOIA 2005.

The premium limit for qualifying policies

A3 (1) For the purposes of paragraphs A1(1)(c) and A2(1)(c) above an individual is in breach of the premium limit for qualifying policies if the total amount of the premiums payable under relevant policies in any relevant period—

(a) exceeds £3,600, or

(b) could exceed £3,600 as a result of—

(i) the exercise of any one or more relevant options conferred by one or more relevant policies, or

(ii) so far as not covered by sub-paragraph (i), the application of one or more terms of one or more relevant policies relating to increases in premiums.

(2) For the purposes of sub-paragraph (1)—

(a) so much of a premium payable under a relevant policy as is charged on the grounds that an exceptional risk of death or disability is involved is to be left out of account in determining the premiums payable under the policy,

(b) so much of the first premium payable under a relevant policy the liability for the payment of which—

(i) is discharged in accordance with paragraph 15(2) below, or

(ii) in the case of a policy in relation to which paragraph 3 below applies, is discharged under a provision of the policy falling within paragraph 3(4)(c),

is to be left out of account in determining the premiums payable under the policy (subject to sub-paragraph (3) below),

(c) in determining the premiums payable under a relevant policy any provision for the waiver of premiums by reason of a person's disability is to be ignored, and

(d) “ relevant period ” means any period of 12 months beginning at or after the time when the event falling within paragraph A1(3) or A2(3) above (“ the relevant event ”) occurs.

(3) The maximum amount that may be left out of account under sub-paragraph (2)(b) in the case of a relevant policy is—

where N is the number of complete years for which ran—

the other policy involved, or

if there is more than one other policy involved, the policy which ran for the most number of complete years.

(4) For the purposes of this paragraph the following are “relevant policies”—

(a) the policy to which the relevant event relates, and

(b) any other policy—

(i) which is a qualifying policy, and

(ii) under which the individual is a beneficiary.

(5) But neither a protected policy nor a pure protection policy is to be a relevant policy by virtue of sub-paragraph (4)(b).

(6) Sub-paragraph (7) applies if this paragraph is to be applied in the case of an individual in consequence of two or more events occurring at the same time (including where one or more of the events falls within paragraph A1(3) above and one or more of the events falls within paragraph A2(3) above).

(7) For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, sub-paragraph (4)(a) has effect as if the reference to the policy to which the relevant event relates were a reference to all the policies to which the events, taken together, relate.

(8) But sub-paragraph (7) does not apply, and sub-paragraph (9) applies instead, if—

(a) all the policies in question are policies issued by the same issuer, and

(b) each of them has an unique identifier in a series of unique identifiers which the issuer gives to policies issued by it.

(9) For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, an event relating to a policy (“policy A”) is treated as occurring before an event relating to another policy (“policy B”) if, in the issuer's series of unique identifiers, policy A's unique identifier comes before policy B's unique identifier.

Protected policies

A4 (1) This paragraph applies for the purposes of this Part of this Schedule.

(2) A policy is “protected” if—

(a) it is issued in respect of an insurance made before 21 March 2012, or

(b) it is issued in respect of an insurance made on or after 21 March 2012 where—

(i) it is a new policy in relation to an earlier policy,

(ii) it is issued in substitution for the earlier policy (and not on its maturity), and

(iii) the earlier policy is a protected policy (whether by virtue of paragraph (a) or this paragraph).

(3) A policy which is protected ceases to be protected if it becomes a restricted relief qualifying policy.

(4) A policy issued as mentioned in sub-paragraph (2)(b) is not protected if—

(a) its issue is an event falling within paragraph A2(3) above, and

(b) after that event it is a restricted relief qualifying policy.

How to determine if an individual is a beneficiary under a policy

A5 (1) This paragraph applies for the purposes of this Part of this Schedule in determining if an individual is a beneficiary under a policy.

(2) An individual is a beneficiary under a policy if the individual beneficially owns—

(a) any rights under the policy, or

(b) any share in any rights under the policy.

(3) An individual is a beneficiary under a policy if—

(a) any rights under the policy are, or any share in any rights under the policy is, held on non-charitable trusts created by the individual, and

(b) those rights are, or that share is, not beneficially owned by any individual.

(4) The following provisions of ITTOIA 2005 apply for the purposes of sub-paragraph (3)(a)—

(a) section 465(6), and

(b) the definition of “non-charitable trust” in section 545(1).

(5) An individual is a beneficiary under a policy if—

(a) any rights under the policy are, or any share in any rights under the policy is, held as security for a debt of the individual, and

(b) those rights are, or that share is, not beneficially owned by any individual.

Further definitions

A6 (1) In this Part of this Schedule—

(a) “ new policy ” has the meaning given in paragraph 17 below,

(b) references to the variation of a policy are to a variation in relation to which paragraph 18 below applies,

(i) which has no surrender value and is not capable of acquiring a surrender value, or

(ii) under which the benefits payable cannot exceed the amount of the premiums paid except on death or in respect of disability, and

(d) “ relevant option ”, in relation to a policy, means an option conferred by the policy on the person to whom it is issued to have another policy substituted for it or to have any of its terms changed.

(2) For the purposes of this Part of this Schedule a “deceased beneficiary event” occurs if, in connection with the death of an individual (“D”) who was a beneficiary under a policy, an individual (“B”) becomes a beneficiary under that policy by reference (wholly or partly) to any rights, or to any share in any rights, by reference to which D was a beneficiary (wholly or partly).

For this purpose, it does not matter if B is already a beneficiary under the policy.

(3) For the purposes of this Part of this Schedule an assignment is a “mortgage endowment assignment” if—

(a) the policy to which the assignment relates secures a capital sum payable either—

(i) on survival for a specified term, or

(ii) on earlier death or on earlier death or disability,

PART I QUALIFYING CONDITIONS

RULES FOR QUALIFYING POLICIES

Rights to be beneficially owned by individuals only

B1 (1) Sub-paragraph (2) applies in relation to a policy issued in respect of an insurance made on or after 6 April 2013.

(2) In order for the policy to be a qualifying policy, when it is issued all the rights under it must be beneficially owned by (and only by)—

(a) one individual, or

(b) two or more individuals taken together.

(This is the case notwithstanding any other provision of this Schedule.)

(3) Sub-paragraph (2) does not apply if the policy is protected.

(4) A policy is “protected” if it is a new policy (as defined in paragraph 17 below) in relation to—

(a) a policy issued in respect of an insurance made before 21 March 2012, or

(b) a policy which is protected (whether by virtue of paragraph (a) or this paragraph).

Assignments

B2 (1) Sub-paragraph (2) applies if any rights under a qualifying policy are, or any share in any rights under a qualifying policy is, assigned on or after 6 April 2013.

(2) The policy is not to be a qualifying policy after the assignment (notwithstanding any other provision of this Schedule).

(3) Sub-paragraph (2) does not apply if—

(a) the assignment is from an individual by way of security for a debt of the individual,

(b) the assignment is to an individual on the discharge of a debt of the individual secured by the rights or share,

(d) the assignment is to an individual in pursuance of an order made by a court,

(e) the assignment is to an individual in pursuance of a legally enforceable obligation relating to a divorce or the dissolution of a civil partnership,

(f) the assignment is from an individual and, as a result of the assignment, the rights assigned are, or the share assigned is, held on trusts created by the individual,

(g) the assignment is to an individual and, as a result of the assignment, the rights assigned are, or the share assigned is, no longer held on trusts, or

(h) the assignment—

(i) is to the personal representatives of a deceased individual, or

(ii) is to an individual where, as a result of the assignment, a deceased beneficiary event (see paragraph A6(2) above) occurs.

(4) Section 465(6) of ITTOIA 2005 applies for the purposes of sub-paragraph (3)(f).

(5) The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that sub-paragraph (2) does not apply if prescribed conditions are met in relation to the assignment.

“ Prescribed ” means prescribed by the regulations.

(6) Regulations under sub-paragraph (5) may—

(a) make different provision for different cases or circumstances, and

(b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.

(7) See paragraphs A1 and A2 above which may apply in consequence of an assignment falling within sub-paragraph (3) or (5).

Required statements

B3 (1) Sub-paragraph (2) applies if any of the following events occurs—

(a) the issue of a policy in respect of an insurance made on or after 6 April 2013;

(b) the variation of a policy on or after 6 April 2013 where paragraph 18 below applies in relation to the variation and as a result of the variation—

(i) the period over which premiums are payable under the policy is or could be lengthened, or

(ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both;

(c) a premium limit event in relation to a protected policy on or after 6 April 2013 (see paragraph A2(9) to (12) above);

(d) an event on or after 6 April 2013 which would be a premium limit event in relation to a protected policy but for paragraph A2(12) above;

(e) the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) above;

(f) a deceased beneficiary event (see paragraph A6(2) above) on or after 6 April 2013;

(g) the conditions in paragraph 24(3) below being fulfilled for the first time in respect of a new non-resident policy where—

(i) the conditions are fulfilled for the first time on or after 6 April 2013, and

(ii) but for the conditions being fulfilled, the policy could not be a qualifying policy because of paragraph 24(2).

(2) Each individual who is a beneficiary under the policy must, before the end of the statement period, make to the issuer of the policy a statement dealing with the prescribed matters.

(3) If an individual does not comply with sub-paragraph (2) the policy is not to be a qualifying policy after the event (notwithstanding any other provision of this Schedule).

(4) In sub-paragraph (1)(b)(ii) “ relevant period ” means any period of 12 months beginning at or after the time of the variation.

(5) Sub-paragraph (2)—

(a) does not apply in the case of an event mentioned in sub-paragraph (1)(a), (e), (f) or (g) if the policy is a pure protection policy, and

(b) does not apply in the case of an event mentioned in sub-paragraph (1)(b), (c) or (d) if the policy is a pure protection policy both before and after the event.

“ Pure protection policy ” has the meaning given by paragraph A6(1)(c) above.

(6) Sub-paragraph (2) does not apply in the case of an event mentioned in sub-paragraph (1)(e) where the assignment falls within paragraph B2(3)(e) above and is a mortgage endowment assignment.

“ Mortgage endowment assignment ” is to be read in accordance with paragraph A6(3) above.

(7) The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that an individual is not required to comply with sub-paragraph (2) if prescribed conditions are met.

“ Prescribed ” means prescribed by the regulations.

(8) Accordingly, if by virtue of regulations under sub-paragraph (7) an individual is not required to comply with sub-paragraph (2), sub-paragraph (3) does not apply because that individual does not comply with sub-paragraph (2).

(9) In sub-paragraph (2)—

(a) the reference to an individual who is a beneficiary under the policy is to be read in accordance with paragraph A5 above,

(b) “ the statement period ” means—

(i) the period of 3 months after the day on which the event occurs, or

(ii) if the event occurs before the day on which the first regulations under paragraph (c) below come into force, the period of 3 months after that day,

or such longer period as an officer of Revenue and Customs may allow, and

(10) An officer of Revenue and Customs may allow a longer period for the purposes of sub-paragraph (9)(b) only if—

(a) the individual in question has made a request in writing to an officer of Revenue and Customs for a longer period to be allowed, and

(b) such an officer is satisfied—

(i) that there is a reasonable excuse for the required statement not having been made within the period mentioned in sub-paragraph (9)(b)(i) or (ii), and

(ii) that the request under paragraph (a) was made without unreasonable delay after the reasonable excuse ceased.

(11) Sub-paragraph (12) applies in relation to a policy if the obligations under the policy of its issuer are at any time the obligations of another person (“ the transferee ”) to whom there has been a transfer of the whole or any part of a business previously carried on by the issuer.

(12) In relation to that time, in sub-paragraph (2) the reference to the issuer of the policy is to be read as a reference to the transferee.

(13) Regulations under sub-paragraph (7) or (9)(c) may—

(a) make different provision for different cases or circumstances, and

(b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.

General rules applicable to whole life and term assurances

1 (1) Subject to the following provisions of this Part of this Schedule, if a policy secures a capital sum which is payable only on death, or one payable either on death or on earlier disability, it is a qualifying policy if—

(a) it satisfies the conditions appropriate to it under sub-paragraphs (2) to (5) below, and

(b) except to the extent permitted by sub-paragraph (7) below, it does not secure any other benefits.

(2) If the capital sum referred to in sub-paragraph (1) above is payable whenever the event in question happens, or if it happens at any time during the life of a specified person—

(a) the premiums under the policy must be payable at yearly or shorter intervals, and either—

(i) until the happening of the event or, as the case may require, until the happening of the event or the earlier death of the specified person, or

(ii) until the time referred to in sub-paragraph (i) above or the earlier expiry of a specified period ending not earlier than ten years after the making of the insurance; and

(b) the total premiums payable in any period of 12 months must not exceed—

(i) twice the amount of the total premiums payable in any other such period, or

(ii) one-eighth of the total premiums which would be payable if the policy were to continue in force for a period of ten years from the making of the insurance, or, in a case falling within sub-paragraph (ii) of paragraph (a) above, until the end of the period referred to in that sub-paragraph.

(3) If the capital sum referred to in sub-paragraph (1) above is payable only if the event in question happens before the expiry of a specified term ending more than ten years after the making of the insurance, or only if it happens both before the expiry of such a term and during the life of a specified person—

(a) the premiums under the policy must be payable at yearly or shorter intervals, and either—

(i) until the happening of the event or the earlier expiry of that term or, as the case may require, until the happening of the event or, if earlier, the expiry of the term or the death of the specified person, or

(ii) as in sub-paragraph (i) above, but with the substitution for references to the term of references to a specified shorter period being one ending not earlier than ten years after the making of the insurance or, if sooner, the expiry of three-quarters of that term; and

(b) the total premiums payable in any period of 12 months must not exceed—

(i) twice the amount of the total premiums payable in any other such period, or

(ii) one-eighth of the total premiums which would be payable if the policy were to continue in force for the term referred to in sub-paragraph (i) of paragraph (a) above, or, as the case may require, for the shorter period referred to in sub-paragraph (ii) of that paragraph.

(4) If the capital sum referred to in sub-paragraph (1) above is payable only if the event in question happens before the expiry of a specified term ending not more than ten years after the making of the insurance, or only if it happens both before the expiry of such a term and during the life of a specified person, the policy must provide that any payment made by reason of its surrender during the period is not to exceed the total premiums previously paid under the policy.

(5) Except where—

(a) the capital sum referred to in sub-paragraph (1) above is payable only in the circumstances mentioned in sub-paragraph (3) or (4) above; and

(b) the policy does not provide for any payment on the surrender in whole or in part of the rights conferred by it; and

(c) the specified term mentioned in sub-paragraph (3) or, as the case may be, (4) above ends at or before the time when the person whose life is insured attains the age of 75 years;

the capital sum, so far as payable on death, must not be less than 75 per cent. of the total premiums that would be payable if the death occurred at the age of 75 years, the age being, if the sum is payable on the death of the first to die of two persons, that of the older of them, if on the death of the survivor of them, that of the younger of them, and in any other case, that of the person on whose death it is payable; and if the policy does not secure a capital sum in the event of death occurring before the age of 16 or some lower age, it must not provide for the payment in that event of an amount exceeding the total premiums previously paid under it.

(6) In determining for the purposes of sub-paragraph (5) above whether a capital sum is less than 75 per cent. of the total premiums, any amount included in the premiums by reason of their being payable otherwise than annually shall be disregarded, and if the policy provides for payment otherwise than annually without providing for the amount of the premiums if they are paid annually, 10 per cent. of the premiums payable under the policy shall be treated as so included.

(7) Notwithstanding sub-paragraph (1)(b) above, if a policy secures a capital sum payable only on death, it may also secure benefits (including benefits of a capital nature) to be provided in the event of a person’s disability; and no policy is to be regarded for the purposes of that provision as securing other benefits by reason only of the fact that—

(a) it confers a right to participate in profits, or

(b) it provides for a payment on the surrender in whole or in part of the rights conferred by the policy, or

(d) it makes provision for the waiver of premiums by reason of a person’s disability, or for the effecting of a further insurance or insurances without the production of evidence of insurability.

(8) In applying sub-paragraph (2) or (3) above to any policy—

(a) no account shall be taken of any provision for the waiver of premiums by reason of a person’s disability, and

(b) if the term of the policy runs from a date earlier, but not more than three months earlier, than the making of the insurance, the insurance shall be treated as having been made on that date, and any premium paid in respect of the period before the making of the insurance, or in respect of that period and a subsequent period, as having been payable on that date.

(9) References in this paragraph to a capital sum payable on any event include references to any capital sum, or series of capital sums, payable by reason of that event but where what is so payable is either an amount consisting of one sum or an amount made up of two or more sums, the 75 per cent. mentioned in sub-paragraph (5) above shall be compared with the smaller or smallest amount so payable; and a policy secures a capital sum payable either on death or on disability notwithstanding that the amount payable may vary with the event.

(10) In relation to any policy issued in respect of an insurance made before 1st April 1976 this paragraph shall have effect—

(a) with the omission of sub-paragraphs (5) and (6) and in sub-paragraph (9) the words “but where what is so payable is either an amount consisting of one sum or an amount made up of two or more sums, the 75 per cent. mentioned in sub-paragraph (5) above shall be compared with the smaller or smallest amount so payable”; and

(b) with the substitution, for sub-paragraph (7)(b), of—

“ (b) it carries a guaranteed surrender value; ” .

General rules applicable to endowment assurances

2 (1) Subject to the following provisions of this Part of this Schedule, a policy which secures a capital sum payable either on survival for a specified term or on earlier death, or earlier death or disability, including a policy securing the sum on death only if occurring after the attainment of a specified age not exceeding 16, is a qualifying policy if it satisfies the following conditions—

(a) the term must be one ending not earlier than ten years after the making of the insurance;

(b) premiums must be payable under the policy at yearly or shorter intervals, and—

(i) until the happening of the event in question; or

(ii) until the happening of that event, or the earlier expiry of a specified period shorter than the term but also ending not earlier than ten years after the making of the insurance; or

(iii) if the policy is to lapse on the death of a specified person, until one of those times or the policy’s earlier lapse;

(i) twice the amount of the total premiums payable in any other such period, or

(ii) one-eighth of the total premiums which would be payable if the policy were to run for the specified term;

(d) the policy—

(i) must guarantee that the capital sum payable on death, or on death occurring after the attainment of a specified age not exceeding 16, will, whenever that event may happen, be equal to 75 per cent. at least of the total premiums which would be payable if the policy were to run for that term, disregarding any amounts included in those premiums by reason of their being payable otherwise than annually, except that if, at the beginning of that term, the age of the person concerned exceeds 55 years, the capital sum so guaranteed may, for each year of the excess, be less by 2 per cent. of that total than 75 per cent. thereof, the person concerned being, if the capital sum is payable on the death of the first to die of two persons, the older of them, if on the death of the survivor of them, the younger of them and in any other case the person on whose death it is payable; and

(ii) if it is a policy which does not secure a capital sum in the event of death before the attainment of a specified age not exceeding 16, must not provide for the payment in that event of an amount exceeding the total premiums previously paid thereunder; and

(e) the policy must not secure the provision (except by surrender in whole or in part of the rights conferred by the policy) at any time before the happening of the event in question of any benefit of a capital nature other than a payment falling within paragraph (d)(ii) above, or benefits attributable to a right to participate in profits or arising by reason of a person’s disability.

(2) For the purposes of sub-paragraph (1)(d)(i) above, 10 per cent. of the premiums payable under any policy that provides for the payment of premiums otherwise than annually without providing for the amount of the premiums if they are paid annually, shall be treated as attributable to the fact that they are not paid annually.

(3) Sub-paragraphs (8) and (9) of paragraph 1 above shall, with any necessary modifications, have effect for the purposes of this paragraph as they have effect for the purposes of that paragraph.

(4) In relation to any policy issued in respect of an insurance made before 1st April 1976 this paragraph shall have effect with the omission in sub-paragraph (1)(d)(i) of the words from “except that if” to the end, and in sub-paragraph (1)(e) of the words “in whole or in part of the rights conferred by the policy”.

Special types of policy

(i)Friendly Society policies

3 (1) Paragraphs 1 and 2 above do not apply to a policy issued by a friendly society in the course of exempt BLAGAB or eligible PHI business in respect of an insurance made or varied on or after 19th March 1985, but such a policy shall not be a qualifying policy unless—

(a) in the case of a policy for the assurance of a gross sum or annuity, the conditions in sub-paragraph (2) are fulfilled with respect to it; and

(b) in the case of a policy for the assurance of a gross sum, the conditions in sub-paragraphs (5) to (11) below are fulfilled with respect to it; . . .

(2) The conditions referred to in sub-paragraph (1) above are as follows—

(a) subject to sub-paragraph (3) below, the period (the “ term ” of the policy) between—

(i) the making of the insurance or, where the contract provides for the term to begin on a date not more than three months earlier than the making of the insurance, that date, and

(ii) the time when the gross sum assured is payable (or, as the case may be, when the first instalment of the annuity is payable),

shall be not less than ten years, and must not, on any contingency other than the death, or retirement on grounds of ill health, of the person liable to pay the premiums or whose life is insured, become less than ten years;

(b) subject to sub-paragraph (4) below, the premiums payable under the policy shall be premiums of equal or rateable amounts payable at yearly or shorter intervals over the whole term of the policy of assurance, or over the whole term of the policy of assurance apart from any period after the person liable to pay the premiums or whose life is insured attains a specified age, being an age which he will attain at a time not less than ten years after the beginning of the term of the policy of assurance;

(3) Notwithstanding sub-paragraph (2)(a) above, the policy—

(a) may provide for a payment to a person of an age not exceeding 18 years at any time not less than five years from the beginning of the term of the policy if the premium or premiums payable in any period of 12 months in the term of the policy do not exceed £13;

(b) may provide for a payment at any time not less than five years from the beginning of the term of the policy, if it is one of a series of payments falling due at intervals of not less than five years, and the amount of any payment, other than the final payment, does not exceed four-fifths of the premiums paid in the interval before its payment.

For the purposes of paragraph (a) above, if the term begins on a date earlier than the making of the insurance, any premium paid in respect of a period before the making of the insurance, or in respect of that period and a subsequent period, shall be treated as having been payable on that date.

(4) Notwithstanding sub-paragraph (2)(b) above, the policy—

(a) may allow a payment at any time after the expiration of one-half of the term of the policy of assurance, or of ten years from the beginning of the term, whichever is the earlier, being a payment in commutation of the liability to pay premiums falling due after that time;

(b) may allow the person liable to pay the premiums to commute any liability for premiums where he ceases to reside in the United Kingdom or gives satisfactory proof of intention to emigrate;

(c) may allow any liability for premiums to be discharged in consideration of surrendering a sum which has become payable on the maturity of any other policy of assurance issued by the same friendly society (or any predecessor of it) to the person liable to pay the premiums, or to his parent, where that other policy of assurance is issued as part of the friendly society’s exempt BLAGAB or eligible PHI business ; and

(d) may make provision for the waiver of premiums by reason of a person’s disability.

(4A) For the purposes of sub-paragraphs (2) and (4) above—

(a) a friendly society formed on the amalgamation of two or more friendly societies is the successor of each of those societies (and each of those societies was a predecessor of the society so formed), and

(b) an incorporated friendly society that was a registered friendly society before its incorporation is the successor of the registered friendly society (and the registered friendly society was the predecessor of the incorporated friendly society).

(5) Where the policy secures a capital sum which is payable only on death or only on death occurring after the attainment of a specified age not exceeding 16, that capital sum must be not less than 75 per cent. of the total premiums which would be payable if the death of the relevant beneficiary occurred at the age of 75.

(6) Where the policy secures a capital sum which is payable only on survival for a specified term, that capital sum must be not less than 75 per cent. of the total premiums which would be payable if the policy were to run for that term.

(7) Where the policy secures a capital sum which is payable on survival for a specified term or on earlier death, or on earlier death or disability (including a policy securing the sum on death only if occurring after the attainment of a specified age not exceeding 16), the capital sum payable on death, whenever that event occurs, must be not less than 75 per cent. of the total premiums which would be payable if the policy were to run for that term, except that if, at the beginning of that term, the age of the relevant beneficiary exceeds 55, that capital sum may, for each year of the excess, be less by 2 per cent. of that total than 75 per cent. thereof.

(8) For the purposes of sub-paragraphs (5) to (7) above—

(a) “ the relevant beneficiary ” means—

(i) if the capital sum concerned is payable on the death of the first to die of two persons, the older of them;

(ii) if that capital sum is payable on the death of the survivor of two persons, the younger of them; and

(iii) in any other case, the person on whose death that capital sum is payable; and

(b) in determining the total premiums payable in any circumstances—

(i) where those premiums are payable otherwise than annually, and the policy is issued by a society other than an old society , there shall be disregarded an amount equal to 10 per cent. of those premiums;

(ii) where the policy is issued by an old society , there shall be disregarded an amount equal to £10 for each year for which account is taken of those premiums or, where those premiums are payable otherwise than annually, an amount equal to 10 per cent. of those premiums if that is greater ; . . .

(iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) If the policy does not secure a capital sum in the event of death occurring before the age of 16 or some lower age, it must not provide for the payment in that event of an amount exceeding the total premiums previously paid under it.

(10) References in this paragraph to a capital sum payable on any event include references to a capital sum or series of capital sums payable by reason of that event, but where what is so payable is either an amount consisting of one sum or an amount made up of two or more sums, any reference in sub-paragraphs (5) to (7) above to 75 per cent. of the total premiums payable in any circumstances shall be compared with the smaller or smallest amount so payable; and for the purposes of those sub-paragraphs a policy secures a capital sum payable either on death or on disability notwithstanding that the amount may vary with the event.

(11) For the purposes of sub-paragraphs (5) to (7) and (10) above, in the case of a policy which provides for any such payments as are referred to in sub-paragraph (3) above (“ interim payments ”), the amount of the capital sum which is payable on any event shall be taken to be increased—

(a) in the case of a policy which secures such a capital sum as is referred to in sub-paragraph (5) above, by the total of the interim payments which would be payable if the death of the relevant beneficiary (within the meaning of that sub-paragraph) occurred at the age of 75; and

(b) in the case of a policy which secures such a capital sum as is referred to in sub-paragraph (6) or (7) above, by the total of the interim payments which would be payable if the policy were to run for the specified term referred to in that sub-paragraph.

4 (1) The provisions of this paragraph have effect notwithstanding anything in paragraph 3 above.

(2) In determining whether a policy—

(a) which affords provision for sickness or other infirmity (whether bodily or mental), and

(b) which also affords assurance for a gross sum independent of sickness or other infirmity, and

(c) under which not less than 60 per cent. of the amount of the premiums is attributable to the provision referred to in paragraph (a) above,

is a qualifying policy, the conditions referred to in paragraph 3(1)(b) above shall be deemed to be fulfilled with respect to it.

(3) A policy shall cease to be a qualifying policy—

(a) if it falls within sub-paragraph (1) of paragraph 3 above and there is such a variation of its terms that any of the conditions referred to in that sub-paragraph ceases to be fulfilled; or

(b) if—

(i) it was effected in the course of the business of effecting or carrying out contracts of insurance which fall within paragraph 1 of Part I or paragraph VI of Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ,

(ii) it was issued by a society other than an old society , and

(iii) the rights conferred by it are surrendered in whole or in part.

5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 (1) A policy which was issued by any registered friendly society . . . , or branch of such a society , in the course of exempt BLAGAB or eligible PHI business . . . in respect of insurances made before 19th March 1985 and which has not been varied on or after that date is a qualifying policy notwithstanding that it does not comply with the conditions specified in paragraph 1 or 2 above.

(2) Notwithstanding paragraphs 3 to 5 or sub-paragraph (1) above, if, on or after 19th March 1985, a person becomes in breach of the limits in section 160 of the Finance Act 2012 , the policy effected by that contract which causes those limits to be exceeded shall not be a qualifying policy; and in any case where—

(a) the limits in that section are exceeded as a result of the aggregation of the sums assured or premiums payable under two or more contracts, and

(b) at a time immediately before one of those contracts was entered into (but not immediately after it was entered into) the sums assured by or, as the case may be, the premiums payable under the contract or contracts which were then in existence did not exceed the limits in that section,

only those policies effected by contracts made after that time shall be treated as causing the limits to be exceeded.

6A Any expression—

(a) which is used in any provision made by any of paragraphs 3 to 6, and

(b) which is used in Part 3 of the Finance Act 2012,

has the same meaning in that provision as it has in that Part.

(ii) Industrial assurance policies

7 (1) A policy issued in the course of an industrial assurance business, and not constituting a qualifying policy by virtue of paragraph 1 or 2 above, is nevertheless a qualifying policy if—

(a) the sums guaranteed by the policy, together with those guaranteed at the time the assurance is made by all other policies issued in the course of such a business to the same person and not constituting qualifying policies apart from this paragraph, do not exceed £1,000;

(b) it satisfies the conditions with respect to premiums specified in paragraph 1(2) above;

(c) except by reason of death or surrender, no capital sum other than one falling within paragraph (d) below can become payable under the policy earlier than ten years after the making of the assurance; and

(d) where the policy provides for the making of a series of payments during its term—

(i) the first such payment is due not earlier than five years after the making of the assurance, and the others, except the final payment, at intervals of not less than five years, and

(ii) the amount of any payment, other than the final payment, does not exceed four-fifths of the premiums paid in the interval before its payment; or

(e) the policy was issued before 6th April 1976, or was issued before 6th April 1979 and is in substantially the same form as policies so issued before 6th April 1976.

(2) For the purposes of this paragraph, the sums guaranteed by a policy do not include any bonuses, or in the case of a policy providing for a series of payments during its term, any of those payments except the first, or any sum payable on death during the term by reference to one or more of those payments except so far as that sum is referable to the first such payment.

8 Where a policy issued in respect of an insurance made after 1st April 1976 in the course of an industrial assurance business is not a qualifying policy by virtue of paragraph 1 or 2 above but is a policy with respect to which the conditions in paragraph 7(1)(b) and (c) above are satisfied, it shall be a qualifying policy whether or not the condition in paragraph 7(1)(a) above is satisfied with respect to it; but where that condition is not satisfied, relief under section 266 in respect of premiums paid under the policy shall be given only on such amount (if any) as would have been the amount of those premiums had that condition been satisfied.

8A (1) Paragraphs 7 and 8 above shall have effect in relation to any policy issued on or after the appointed day as if the references to the issue of a policy in the course of an industrial assurance business were references to the issue of a policy by any company in a case in which—

(a) the company, before that day and in the course of such a business, issued any policy which was a qualifying policy by virtue of either of those paragraphs; and

(b) the policies which on 28th November 1995 were being offered by the company as available to be issued included policies of the same description as the policy issued on or after the appointed day.

(2) In this paragraph “ the appointed day ” means such day as the Board may by order appoint.

(iii) Family income policies and mortgage protection

9 (1) The following provisions apply to any policy which is not a qualifying policy apart from those provisions, and the benefits secured by which consist of or include the payment on or after a person’s death of—

(a) one capital sum which does not vary according to the date of death, plus a series of capital sums payable if the death occurs during a specified period, or

(b) a capital sum, the amount of which is less if the death occurs in a later part of a specified period than if it occurs in an earlier part of that period.

(2) A policy falling within sub-paragraph (1)(a) above is a qualifying policy if—

(a) it would be one if it did not secure the series of capital sums there referred to, and the premiums payable under the policy were such as would be chargeable if that were in fact the case, and

(b) it would also be one if it secured only that series of sums, and the premiums thereunder were the balance of those actually so payable.

(3) A policy falling within sub-paragraph (1)(b) above is a qualifying policy if—

(a) it would be one if the amount of the capital sum there referred to were equal throughout the period to its smallest amount, and the premiums payable under the policy were such as would be chargeable if that were in fact the case, and

(b) it would also be one if it secured only that capital sum so far as it from time to time exceeds its smallest amount, and the premiums payable thereunder were the balance of those actually so payable.

Other special provisions

(i) Short-term assurances

10 A policy which secures a capital sum payable only on death or payable either on death or on earlier disability shall not be a qualifying policy if the capital sum is payable only if the event in question happens before the expiry of a specified term ending less than one year after the making of the insurance.

(ii) Personal accident insurance

11 (1) A policy which evidences a contract of insurance to which sub-paragraph (3) below applies shall not be a qualifying policy unless it also evidences —

(a) a contract of insurance on human life; or

(b) a contract to pay annuities on human life.

(2) A policy which evidences a contract of insurance to which sub-paragraph (4) below applies shall not be a qualifying policy unless it also evidences a contract falling within section 83(2)(a) of the Insurance Companies Act 1974.

(3) This sub-paragraph applies to contracts of insurance issued in respect of insurances made on or after 25th March 1982 against risks of persons dying as a result of an accident or an accident of a specified class, not being contracts which—

(a) are expressed to be in effect for a period of not less than five years or without limit of time; and

(b) either are not expressed to be terminable by the insurer before the expiration of five years from their taking effect or are expressed to be so terminable before the expiration of that period only in special circumstances therein mentioned.

(4) This sub-paragraph applies to contracts of insurance issued in respect of insurances made before 25th March 1982 against risks of persons dying as a result of an accident or an accident of a specified class, not being contracts falling within section 83(2)(b) of the Insurance Companies Act 1974.

(iii) Exceptional risk of death or disability

12 For the purpose of determining whether any policy is a qualifying policy, there shall be disregarded—

(a) so much of any premium thereunder as is charged on the grounds that an exceptional risk of death or disability is involved; and

(b) any provision under which, on those grounds, any sum may become chargeable as a debt against the capital sum guaranteed by the policy on death or disability .

(iv) Connected policies

13 Subject to paragraph 14 below, where the terms of any policy provide that it is to continue in force only so long as another policy does so, neither policy is a qualifying policy unless, if they had constituted together a single policy issued in respect of an insurance made at the time of the insurance in respect of which the first-mentioned policy was issued, that single policy would have been a qualifying policy.

14 (1) A policy shall not be a qualifying policy if the policy is connected with another policy and the terms of either policy provide benefits which are greater than would reasonably be expected if any policy connected with it were disregarded.

(2) For the purposes of this paragraph a policy is connected with another policy if they are at any time simultaneously in force and either of them is issued with reference to the other, or with a view to enabling the other to be issued on particular terms or facilitating its being issued on those terms.

(3) In this paragraph “ policy ” means a policy evidencing a contract of long-term insurance , and includes any such policy issued outside the United Kingdom.

(3A) In sub-paragraph (3) “contract of long-term insurance” means a contract which falls within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

(4) Where any person issues a policy—

(a) which by virtue of this paragraph is not a qualifying policy, or

(b) the issue of which causes another policy to cease by virtue of this paragraph to be a qualifying policy,

he shall within three months of issuing the policy give notice of that fact to the Board.

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

(6) This paragraph shall apply to policies issued in respect of insurances made before 23rd August 1983 in accordance with sub-paragraphs (7) and (8) below.

(7) Where—

(a) a policy is issued in respect of an insurance made before 23rd August 1983, and

(b) a policy is issued in respect of an insurance made on or after that date which is connected with it within the meaning of this paragraph,

sub-paragraphs (1) to (6) above shall apply to the policy issued in respect of an insurance made before that date.

(8) Sub-paragraphs (1) to (7) above shall apply to policies issued in respect of insurances made before 23rd August 1983 (other than policies which, disregarding this paragraph, fall within sub-paragraph (7)) with the substitution—

(a) in sub-paragraph (1) for the words “and the terms of either policy” of the words “ the terms of which ” ;

(b) in sub-paragraph (3) for the words from “long term business” to “1982” of the words “ ordinary long-term insurance business within the meaning of section 83(2) of the Insurance Companies Act 1974 (as enacted) or, in relation to a policy made after 25th March 1982, section 96(1) of the Insurance Companies Act 1982 ” ; and

(9) In any case where payments made—

(a) after 22nd August 1983, and

(b) by way of premium or other consideration in respect of a policy issued in respect of an insurance made before that date,

exceed £5 in any period of 12 months, the policy shall be treated for the purposes of this paragraph as if it were issued in respect of an insurance made after 22nd August 1983; but nothing in this paragraph shall apply with respect to any premium paid in respect of it before that date.

(10) Sub-paragraphs (8) and (9) above do not apply in relation to policies issued in the course of industrial assurance business.

(v) Premiums paid out of sums due under previous policies

15 (1) Where, in the case of a policy under which a single premium only is payable, liability for the payment of that premium is discharged in accordance with sub-paragraph (2) below, the policy is a qualifying policy notwithstanding anything in paragraph 1(2) or (3) or paragraph 2(1)(b) or (c) above; and where, in the case of any other policy, liability for the payment of the first premium thereunder, or of any part of that premium, is so discharged, the premium or part shall be disregarded for the purposes of paragraphs 1(2)(b) and (3)(b) and 2(1)(c) above.

(2) Liability for the payment of a premium is discharged in accordance with this sub-paragraph if it is discharged by the retention by the company with which the insurance is made of the whole or a part of any sum which has become payable on the maturity of, or on the surrender more than ten years after its issue of the rights conferred by, a policy—

(a) previously issued by the company to the person making the insurance, or, if it is made by trustees, to them or any predecessors in office; or

(b) issued by the company when the person making the insurance was an infant, and securing a capital sum payable either on a specified date falling not more than one month after his attaining 25, or on the anniversary of the policy immediately following his attainment of that age,

being, unless it is a policy falling within paragraph (b) above and the premium in question is a first premium only, a policy which was itself a qualifying policy, or which would have been a qualifying policy had it been issued in respect of an insurance made after 19th March 1968.

(vi) Additional premiums under section 72(9) of the Ginance Act 1984

16 In determining whether a policy is a qualifying policy, no account shall be taken of any amount recovered, as if it were an additional premium, in pursuance of section 72(9) of the Finance Act 1984.

(viii) Substituitions and variations

17 (1) Subject to paragraph 19 below, where one policy (“ the new policy ”) is issued in substitution for, or on the maturity of and in consequence of an option conferred by, another policy (“ the old policy ”), the question whether the new policy is a qualifying policy shall, to the extent provided by the rules in sub-paragraph (2) below, be determined by reference to both policies.

(2) The rules (for the purposes of which, the question whether the old policy was a qualifying policy shall be determined in accordance with this Part of this Schedule, whatever the date of the insurance in respect of which it was issued), are as follows—

(za) the new policy cannot be a qualifying policy if the old policy was not a qualifying policy by virtue of—

(i) paragraph A1(2), B1(2), B2(2) or B3(3) above, or

(ii) sub-paragraph (i) above or this sub-paragraph;

(a) if the new policy would apart from this paragraph be a qualifying policy but the old policy was not and paragraph (za) above does not apply , the new policy is not a qualifying policy unless the person making the insurance in respect of which it is issued was an infant when the old policy was issued, and the old policy was one securing a capital sum payable either on a specified date falling not later than one month after his attaining 25 or on the anniversary of the policy immediately following his attainment of that age;

(b) if the new policy would apart from this paragraph be a qualifying policy, and the old policy was also a qualifying policy, the new policy is a qualifying policy unless—

(i) it takes effect before the expiry of ten years from the making of the insurance in respect of which the old policy was issued, and

(ii) subject to sub-paragraph (4) below, the highest total of premiums payable thereunder for any period of 12 months expiring before that time is less than one half of the highest total paid for any period of 12 months under the old policy, or under any related policy issued less than ten years before the issue of the new policy (“ related policy ” meaning any policy in relation to which the old policy was a new policy within the meaning of this paragraph, any policy in relation to which that policy was such a policy, and so on);

(c) if the new policy would not apart from this paragraph be a qualifying policy, and would fail to be so by reason only of paragraph 1(2) or (3) or 2(1)(a), (b) or (c) above, it is nevertheless a qualifying policy if the old policy was a qualifying policy and—

(i) the old policy was issued in respect of an insurance made more than ten years before the taking effect of the new policy, and, subject to sub-paragraph (4) below, the premiums payable for any period of 12 months under the new policy do not exceed the smallest total paid for any such period under the old policy; or

(ii) the old policy was issued outside the United Kingdom, and the circumstances are as specified in sub-paragraph (3) below.

(3) The circumstances are—

(a) where the new policy referred to in sub-paragraph (2)(c) above is issued after 22nd February 1984, that the policy holder under the new policy became resident in the United Kingdom during the 12 months ending with the date of its issue;

(b) where paragraph (a) above does not apply, that the person in respect of whom the new insurance is made became resident in the United Kingdom during the 12 months ending with the date of its issue;

(c) that the issuing company certify that the new policy is in substitution for the old, and that the old was issued either by a permanent establishment of theirs outside the United Kingdom or by a company outside the United Kingdom with whom they have arrangements for the issue of policies in substitution for ones held by persons coming to the United Kingdom; and

(d) that the new policy confers on the holder benefits which are substantially equivalent to those which he would have enjoyed if the old policy had continued in force.

(4) Where the new policy is one issued on or after 1st April 1976 then, in determining under sub-paragraph (2)(a) to (c) above whether that policy would or would not (apart from sub-paragraphs (1) to (3) above) be a qualifying policy, there shall be left out of account so much of the first premium payable thereunder as is accounted for by the value of the old policy.

(5) In determining under sub-paragraph (2)(a) to (c) above whether the new policy would apart from this paragraph be a qualifying policy, paragraph A1 above is not to be applied in relation to the issue of the new policy; but this does not stop that paragraph being applied in relation to the issue of the new policy after this paragraph has been applied.

18 (1) Subject to paragraph 19 below and to the provisions of this paragraph, where the terms of a policy are varied, the question whether the policy after the variation is a qualifying policy shall be determined in accordance with the rules in paragraph 17 above, with references in those rules to the new policy and the old policy construed for that purpose as references respectively to the policy after the variation and the policy before the variation, and with any other necessary modifications.

(2) In applying any of those rules by virtue of this paragraph, the question whether a policy after a variation would be a qualifying policy apart from the rule shall be determined as if any reference in paragraphs 1, 2, 3(5) to (11), 4 to 9 , 12 and 13 above to the making of an insurance, or to a policy’s term, were a reference to the taking effect of the variation or, as the case may be, to the term of the policy as from the variation.

(3) This paragraph does not apply by reason of—

(a) any variation which, whether or not of a purely formal character, does not affect the terms of a policy in any significant respect, or

(b) any variation effected before the end of the year 1968 for the sole purpose of converting into a qualifying policy any policy issued (but not one treated, by virtue of paragraph 8(1) and (2) of Schedule 14, as issued) in respect of an insurance made after 19th March 1968, or

(i) on or after such day as the Board may by order appoint, and

(ii) in consideration of a change in the method of payment of premiums from collection by a person collecting premiums from house to house to payment by a different method , or

(d) any variation which alters the method for calculating the benefits secured by the policy.

(4) For the purposes of this paragraph there is no variation in the terms of a policy where—

(a) an amount of premium chargeable on the grounds that an exceptional risk of death or disability is involved becomes or ceases to be payable, or

(b) the policy is amended by the insertion, variation or removal of a provision under which, on those grounds, any sum may become chargeable as a debt against the capital sum guaranteed by the policy on death or disability.

19 (1) The following provisions of this paragraph shall have effect for determining for the purposes of this Schedule whether a policy has been varied or whether a policy which confers on the person to whom it is issued an option to have another policy substituted for it or to have any of its terms changed is a qualifying policy.

(2) If the policy is one issued in respect of an insurance made before 1st April 1976—

(a) any such option shall, until it is exercised, be disregarded in determining whether the policy is a qualifying policy; and

(b) any change in the terms of the policy which is made in pursuance of such an option shall be deemed to be a variation of the policy.

(3) If the policy is one issued in respect of an insurance made on or after 1st April 1976, the policy shall not be a qualifying policy unless it satisfies the conditions applicable to it under this Schedule before any such option is exercised and—

(a) each policy that might be substituted for it in pursuance of such an option would satisfy those conditions under the rules of paragraph 17 above; and

(b) the policy would continue to satisfy those conditions under the rules of that paragraph as applied by paragraph 18 above if each or any of the changes capable of being made in pursuance of such an option had been made and were treated as a variation;

and it shall not be treated as being varied by reason only of any change made in pursuance of such an option.

20 (1) Where, as a result of a variation in the life or lives for the time being assured, a qualifying policy (“ the earlier policy ”) is replaced by a new policy (“ the later policy ”) which in accordance with the rules in paragraph 17 above is also a qualifying policy, then, subject to sub-paragraph (2) below, for the purposes of—

(a) sections 268 to 270 . . . ; and

(b) any second or subsequent application of this paragraph;

the later policy and the earlier policy shall be treated as a single policy issued in respect of an insurance made at the time of the making of the insurance in respect of which the earlier policy was issued; and, accordingly, so long as the later policy continues to be a qualifying policy, the single policy shall also be treated as a qualifying policy for those purposes.

(2) Sub-paragraph (1) above does not apply unless—

(a) any sum which would otherwise become payable by the insurer on or in connection with the coming to an end of the earlier policy is retained by the insurer and applied in the discharge of some or all of the liability for any premium becoming due under the later policy; and

(b) no consideration in money or money’s worth (other than the benefits for which provision is made by the later policy) is receivable by any person on or in connection with the coming to an end of the earlier policy or the coming into existence of the later policy.

(3) Any sum which is applied as mentioned in sub-paragraph (2)(a) above—

(a) shall be left out of account in determining, for the purposes of sections 268 to 270 . . . , the total amount which at any time has been paid by way of premiums under the single policy referred to in sub-paragraph (1) above; . . .

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

(4) This paragraph applies where the later policy comes into existence on or after 25th March 1982.

(viii) Policy reinstated after non-payment of premium

20ZA (1) This paragraph applies to a qualifying policy (“the original policy”) if conditions A to D are satisfied.

(2) Condition A is that one or more premiums due under the original policy are not paid on or before the date on which they become due.

(3) Condition B is that the original policy, in accordance with its terms, is treated as having lapsed or is converted into a paid-up policy—

(a) by reason only of the failure to pay that premium or those premiums, and

(b) within the period of 12 months beginning with the day following the day on which the earliest unpaid premium becomes due.

(4) Condition C is that the original policy—

(a) is reinstated on the same terms, or

(b) is replaced by another policy in the same terms (“the replacement policy”),

on or before the thirtieth day after the first anniversary of the day following the day on which the earliest unpaid premium becomes due.

(5) Condition D is that all unpaid premiums due under the original policy are paid on or before the date on which the policy is reinstated or replaced.

(6) Where condition C is satisfied by virtue of sub-paragraph (4)(b) the replacement policy is to be treated for the purposes of this Schedule as if it were the original policy.

(7) The policy is to be treated for the purposes of this Schedule as if the premiums payable under it had been paid on their due dates.

Meaning of “industrial assurance business”

20A In this Part of this Schedule “ industrial assurance business ” means any industrial assurance business within the meaning given by—

(a) section 1(2) of the Industrial Assurance Act 1923, or

(b) Article 3(1) of the Industrial Assurance (Northern Ireland) Order 1979,

which was carried on before 1 December 2001.

PART II CERTIFICATION OF QUALIFYING POLICIES

Policies issued in respect of insurances made on or after 1st April 1976 or varied on or after that date

21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III POLICIES ISSUED BY NON-RESIDENT COMPANIES

23 In this Part—

(a) any reference to a paragraph is a reference to that paragraph of this Schedule; and

(b) “ the old policy ” and “ the new policy ” have the same meanings as in paragraph 17.

24 (1) This paragraph applies to a policy of life insurance—

(a) which is issued in respect of an insurance made after 17th November 1983; and

(b) which is so issued by a company resident outside the United Kingdom;

and in the following provisions of this paragraph such a policy is referred to as “ a new non-resident policy ” and the company by which it is issued is referred to as “ the issuing company ”.

(2) Subject to section 55(3) of the Finance Act 1995 (transitional provision for the certification of certain policies), a new non-resident policy that falls outside sub-paragraph (2A) below shall not be a qualifying policy until such time as the conditions in sub-paragraph (3) are fulfilled with respect to it.

(2A) A policy falls outside this sub-paragraph unless, at the time immediately before the appointed date for the purposes of section 55 of the Finance Act 1995 (removal of certification requirements) , it was a qualifying policy by virtue of sub-paragraphs (2)(b) and (4) of this paragraph, as they had effect in relation to that time.

(3) The conditions . . . referred to in sub-paragraph (2) above are—

(a) that the issuing company is lawfully carrying on in the United Kingdom life assurance business (as defined in section 56 of the Finance Act 2012 ); and

(b) that the premiums under the policy are payable to a permanent establishment in the United Kingdom of the issuing company, being a permanent establishment through which the issuing company carries on its life assurance business; and

(c) the premiums under the policy form part of those business receipts of the issuing company which arise through that permanent establishment .

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

25 (1) In the application of paragraph 17 in any case where—

(a) the old policy was issued in respect of an insurance made after 17th November 1983 and could not be a qualifying policy by virtue of paragraph 24, and

(b) the new policy is not a new non-resident policy as defined in that paragraph,

the rules for the determination of the question whether the new policy is a qualifying policy shall apply with the modifications in sub-paragraph (2) below.

(2) The modifications are the following—

(a) if, apart from paragraph 24, the old policy or any related policy (within the meaning of paragraph 17(2)(b)) of which account falls to be taken would have been a qualifying policy, that policy shall be assumed to have been a qualifying policy for the purposes of paragraph 17(2); and

(b) if, apart from this paragraph, the new policy would be a qualifying policy, it shall not be such a policy unless the circumstances are as specified in paragraph 17(3); and

(c) in paragraph 17(3)(c) the words “either by a permanent establishment of theirs outside the United Kingdom or” shall be omitted;

and references in this sub-paragraph to being a qualifying policy shall have effect, in relation to any time before the appointed date for the purposes of section 55 of the Finance Act 1995 (removal of certification requirements) , as including a reference to being capable of being certified as such a policy.

(2A) In determining for the purposes of sub-paragraph (2)(a) above whether a policy would, apart from paragraph 24, have been a qualifying policy, paragraphs A1 and B1 to B3 above are to be ignored.

(But this does not affect the application of any of those paragraphs in relation to the new policy.)

(3) In the application of paragraph 17 in any case where—

(a) the old policy is a qualifying policy which was issued in respect of an insurance made on or before 17th November 1983 but, if the insurance had been made after that date, the policy could not have been a qualifying policy by virtue of paragraph 24, and

(b) the new policy is issued after that date and is not a new non-resident policy, as defined in paragraph 24,

the rules for the determination of the question whether the new policy is a qualifying policy shall apply with the modification in sub-paragraph (2)(c) above.

26 If, in the case of a substitution of policies falling within paragraph 25(1) or (3), the new policy confers such an option as results in the application to it of paragraph 19(3), the new policy shall be treated for the purposes of paragraph 19(3) as having been issued in respect of an insurance made on the same day as that on which was made the insurance in respect of which the old policy was issued.

27 (1) For the purposes of Part I and paragraph 24, a policy of life insurance which was issued—

(a) in respect of an insurance made on or before 17th November 1983, and

(b) by a company resident outside the United Kingdom,

shall be treated as issued in respect of an insurance made after that date if the policy is varied after that date so as to increase the benefits secured or to extend the term of the insurance.

(2) If a policy of life insurance which was issued as mentioned in sub-paragraph (1)(a) and (b) above confers on the person to whom it is issued an option to have another policy substituted for it or to have any of its terms changed, then for the purposes of that sub-paragraph any change in the terms of the policy which is made in pursuance of the option shall be deemed to be a variation of the policy.

SCHEDULE 15A CONTRACTUAL SAVINGS SCHEMES

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SCHEDULE 15B Venture Capital Trusts: Relief from Income Tax

Part I Relief on investment

Entitlement to claim relief

Loan-linked investments

Loss of investment relief

Assessment on withdrawal or reduction of relief

Provision of information

Interpretation of Part I

Part II Relief on distributions

7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “permitted maximum”

8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation of Part II

9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 16

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SCHEDULE 17

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Schedule 17A

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SCHEDULE 18

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SCHEDULE 18A

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SCHEDULE 19

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SCHEDULE 19AA

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Schedule 19AB

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SCHEDULE 19ABA

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SCHEDULE 19AC

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Section 450.

SCHEDULE 19A UNDERWRITERS: ASSESSMENT AND COLLECTION OF TAX

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Section 496A

SCHEDULE 19B Petroleum extraction activities: exploration expenditure supplement

Part 1 Introductory

About this Schedule

1 (1) This Schedule entitles a company carrying on a ring fence trade, on making a claim in respect of an accounting period ending on or after 1st January 2004 but before 1st January 2006 , to a supplement (initially of 6%, but variable by Treasury order) in respect of—

(a) qualifying capital expenditure incurred before the trade is set up and commenced,

(b) losses incurred in the trade, determined by reference to allowances under Part 6 of the Capital Allowances Act (expenditure on research and development) in respect of qualifying capital expenditure, and

(2) To qualify, the capital expenditure in question must be incurred on or after 1st January 2004 but before 1st January 2006 in respect of oil and gas exploration and appraisal (as well as satisfying other conditions).

(3) Part 2 makes provision about the application and interpretation of this Schedule.

(4) Part 3 makes provision about supplement in relation to expenditure incurred by the company—

(a) with a view to carrying on a ring fence trade, but

(b) in an accounting period before the company sets up and commences that trade.

(5) Part 4 makes provision about supplement in relation to losses incurred in carrying on the ring fence trade.

(6) There is a limit on the number of accounting periods (6) in respect of which a company may claim supplement.

(7) In determining the amount of supplement allowable, reductions fall to be made in respect of—

(a) disposal receipts by virtue of section 555 of the Capital Allowances Act (disposal of oil licence with exploitation value),

(b) ring fence losses that could be set off under section 393A or 393B against ring fence profits of earlier periods,

(c) ring fence losses incurred in earlier periods that fall to be set off under section 393 against profits of succeeding periods,

(d) unrelieved group ring fence profits.

Part 2 Application and interpretation

Qualifying companies

2 This Schedule applies in relation to any company which—

(a) carries on a ring fence trade, or

(b) is engaged in oil and gas exploration and appraisal (see section 837B of this Act and section 1003 of ITA 2007 ) with a view to carrying on a ring fence trade,

and in this Schedule any such company is referred to as a “ qualifying company ”.

Accounting periods

3 (1) In this Schedule, in the case of any qualifying company,—

“ the commencement period ” means the accounting period in which the company sets up and commences its ring fence trade;
“ post-commencement period ” means any accounting period ending on or after 1st January 2004 but before 1st January 2006 —
(a)
which is the commencement period, or
(b)
which ends after the commencement period;
“ pre-commencement period ” means any accounting period ending—
(a)
on or after 1st January 2004 but before 1st January 2006 , and
(b)
before the commencement period.

(2) For the purposes of this Schedule a company not within the charge to corporation tax which incurs qualifying E&A expenditure is to be treated as having such accounting periods as it would have if—

(a) it carried on a trade consisting of the activities in respect of which the expenditure is incurred, and

(b) it had started to carry on that trade when it started to carry on the research and development on which the expenditure is incurred.

(3) In the case of an accounting period (a “straddling period”) of any qualifying company beginning before 1st January 2006 and ending on or after that date—

(a) so much of the straddling period as falls before 1st January 2006, and

(b) so much of the straddling period as falls on or after that date,

are treated as separate accounting periods for the purposes of this Schedule.

(4) Special provision is made elsewhere in this Schedule in relation to straddling periods (see paragraphs 16, 18A and 22).

The relevant percentage

4 (1) For the purposes of this Schedule, the relevant percentage for any accounting period ending on or after 1st January 2004 is 6%.

(2) The Treasury may by order vary the percentage for the time being specified in sub-paragraph (1) for such accounting periods as may be specified in the order.

Limit on number of accounting periods for which supplement may be claimed

5 (1) A company may claim supplement under this Schedule in respect of no more than 6 accounting periods.

(2) The accounting periods in respect of which claims are made need not be consecutive.

Qualifying E&A expenditure

6 (1) For the purposes of this Schedule “ qualifying E&A expenditure ”is any expenditure as respects which the following conditions are satisfied.

(2) Condition 1 is that the expenditure is incurred on or after 1st January 2004 but before 1st January 2006 .

(3) Condition 2 is that, for the purposes of Part 6 of the Capital Allowances Act, the expenditure is qualifying expenditure incurred on research and development consisting of oil and gas exploration and appraisal (see section 437(2)(b) of that Act).

(4) Condition 3 is that an allowance under section 441 of that Act is claimed in respect of the expenditure.

(5) Condition 4 is that the expenditure is incurred in the course of oil extraction activities.

(6) Condition 5 is that—

(a) those oil extraction activities are comprised in a ring fence trade, or

(b) after incurring the expenditure, the person incurring it sets up and commences a ring fence trade connected with the research and development or starts to be within the charge to corporation tax in respect of such a ring fence trade.

Unrelieved group ring fence profits for accounting periods

7 (1) There is an amount of unrelieved group ring fence profits for an accounting period of a qualifying company (“company Q”) in any case where—

(a) the company and any other company (“company X”) are members of the same group of companies, within the meaning given by section 413(3)(a), and

(b) company X has an amount of taxable ring fence profits (see paragraph 8) for a corresponding accounting period.

(2) An accounting period of company X corresponds to an accounting period of company Q if—

(a) it coincides with, or falls wholly within, the accounting period of company Q, or

(b) it falls partly within the accounting period of company Q.

(3) Where an accounting period of company X—

(a) coincides with an accounting period of company Q, or

(b) falls wholly within an accounting period of company Q,

there is, for the accounting period of company Q, an amount of unrelieved group ring fence profits equal to the whole of company X’s taxable ring fence profits for its accounting period.

(4) Where an accounting period of company X falls partly within an accounting period of company Q—

(a) there is an amount of unrelieved group ring fence profits for the accounting period of company Q, and

(b) that amount is an amount equal to the part of company X’s taxable ring fence profits for its accounting period that is attributable, on an apportionment in accordance with section 834(4), to the part of that period which falls within the accounting period of company Q.

(5) This paragraph applies for the purposes of this Schedule.

Taxable ring fence profits of an accounting period

8 For the purposes of this Schedule, a company has taxable ring fence profits for an accounting period if it has an amount of ring fence profits which is chargeable to corporation tax for that accounting period after any group relief claimed under Chapter 4 of Part 10.

Part 3 Pre-commencement supplement

Supplement in respect of a pre-commencement accounting period

9 (1) Where—

(a) a qualifying company claims an allowance under section 441 of the Capital Allowances Act (research and development allowances) for the commencement period, and

(b) the claim is for an allowance in respect of qualifying E&A expenditure incurred before that period,

the company may also claim supplement under this Part of this Schedule (“pre-commencement supplement”) in respect of one or more pre-commencement periods.

(2) Any pre-commencement supplement allowed on a claim in respect of a pre-commencement period shall be treated as an allowance under Part 6 of the Capital Allowances Act for the commencement period in respect of qualifying E&A expenditure incurred by the company.

(3) The amount of the supplement for any pre-commencement period in respect of which a claim under this paragraph is made is the relevant percentage for that period of the reference amount for that period.

(4) If the pre-commencement period is a period of less than twelve months, the amount of the supplement for the period (apart from this sub-paragraph) shall be reduced proportionally.

(5) Paragraphs 10 to 13 have effect for the purpose of determining the reference amount for a pre-commencement period.

The mixed pool of qualifying E&A expenditure and supplement previously allowed

10 (1) For the purpose of determining the amount of any pre-commencement supplement, a qualifying company shall be taken to have had, at all times in the pre-commencement periods of the company, a continuing mixed pool of qualifying E&A expenditure and pre-commencement supplement.

(2) The pool shall be taken to have consisted of—

(a) the company’s qualifying E&A expenditure, allocated to the pool for each pre-commencement period in accordance with sub-paragraph (3), and

(b) the company’s pre-commencement supplement, allocated to the pool for each pre-commencement period in accordance with sub-paragraph (4).

(3) To allocate qualifying E&A expenditure to the pool for any pre-commencement period, take the following steps—

(a) Step 1: count as eligible expenditure for that period so much of the qualifying E&A expenditure mentioned in paragraph 9(1)(b) as was incurred in that period,

(b) Step 2: find the total of all the eligible expenditure for that period (amount E),

(d) Step 4: if paragraph 12 applies, reduce (or, as the case may be, further reduce) amount E in accordance with that paragraph,

and so much of amount E as remains after making those reductions shall be taken to have been added to the pool in that period.

(4) If any pre-commencement supplement is allowed on a claim in respect of a pre-commencement period, the amount of that supplement shall be taken to have been added to the pool in that period.

Treatment of disposal value on disposal of oil licence with exploitation value

11 (1) This paragraph applies in any case where—

(a) the qualifying company disposes of an interest in an oil licence in a pre-commencement period,

(b) part of the value of the interest (the “ deductible amount ”) is attributable to qualifying E&A expenditure incurred by the company, and

(c) section 555 of the Capital Allowances Act (disposal of oil licence with exploitation value) has effect in relation to the disposal.

(2) For the purpose of allocating qualifying E&A expenditure to the pool for each pre-commencement period—

(a) find the total of the deductible amounts in the case of all such disposals made by the company (amount D), and

(b) taking later periods before earlier periods, reduce (but not below nil) amount E for any pre-commencement period by setting against it so much of amount D as does not fall to be set against amount E for a later pre-commencement period.

(3) In this paragraph “ oil licence ” has the same meaning as in section 555 of the Capital Allowances Act (see section 552 (1) of that Act).

Reduction in respect of unrelieved group ring fence profits

12 (1) This paragraph applies if there is an amount of unrelieved group ring fence profits for a pre-commencement period.

(2) For the purpose of allocating qualifying E&A expenditure to the pool for that period—

(a) find so much (if any) of amount E for that period as remains after any reduction falling to be made under paragraph 11, and

(b) reduce that amount (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.

The reference amount for a pre-commencement period

13 For the purposes of this Part of this Schedule, the reference amount for a pre-commencement period is the amount in the pool at the end of the period—

(a) after the addition to the pool of any qualifying E&A expenditure allocated to the pool for that period in accordance with paragraph 10(3), but

(b) before determining, and adding to the pool, the amount of any pre-commencement supplement claimed in respect of the period.

Claims for pre-commencement supplement

14 (1) Any claim for pre-commencement supplement in respect of a pre-commencement period must be made at the same time as, and as if it were part of, the claim under section 441 of the Capital Allowances Act mentioned in paragraph 9(1)(a).

(2) Subsection (3) of that section (claim for reduced amount) applies in relation to any such claim.

Part 4 Post-commencement supplement

Supplement in respect of a post-commencement period

15 (1) A qualifying company which incurs a qualifying E&A loss (see paragraph 17) in a post-commencement period may claim supplement under this Part of this Schedule (“post-commencement supplement”) in respect of—

(a) that period, or

(b) any subsequent accounting period in which it carries on its ring fence trade.

(2) Any post-commencement supplement allowed on a claim in respect of a post-commencement period shall be treated for the purposes of the Corporation Tax Acts (other than this Part of this Schedule or sections 321 to 329 of CTA 2010 ) as if it were a loss—

(a) incurred in carrying on the ring fence trade in that period,

(b) which falls in whole to be set off under section 393 against trading income from the ring fence trade in succeeding accounting periods.

(3) Paragraph 74 of Schedule 18 to the Finance Act 1998(company tax returns etc: time limit for claims for group relief) shall apply in relation to a claim for post-commencement supplement as it applies in relation to a claim for group relief.

Amount of post-commencement supplement for a post-commencement period

16 (1) The amount of the post-commencement supplement for any post-commencement period in respect of which a claim under paragraph 15 is made is the relevant percentage for that period of the reference amount for that period.

(2) If the post-commencement period is a period of less than twelve months, the amount of the supplement for the period (apart from this sub-paragraph) shall be reduced proportionally.

(2A) But, if the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006, sub-paragraph (2) has no effect in relation to the amount of the supplement for that period.

(3) Paragraphs 19 to 24 have effect for the purpose of determining the reference amount for a post-commencement period.

Ring fence losses and qualifying E&A losses

17 (1) Where—

(a) in any post-commencement period (“the period of the loss”) a qualifying company carrying on a ring fence trade incurs a loss in the trade, and

(b) some or all of the loss falls to be set off under section 393 against trading income from the trade in succeeding accounting periods,

so much of the loss as falls to be so set off is a “ring fence loss” of the company.

(2) In determining for the purposes of this Part of this Schedule how much of a loss incurred in a ring fence trade falls to be set off as mentioned in sub-paragraph (1)(b), it shall be assumed—

(a) that every claim is made that could be made by the company under section 393A to set losses incurred in the ring fence trade against ring fence profits of earlier post-commencement periods, and

(b) that (where appropriate) section 393B applies in relation to every such claim.

(3) So much of a ring fence loss as is attributable to qualifying E&A allowances for the period of the loss is a “qualifying E&A loss”.

(4) A ring fence loss is attributable to qualifying E&A allowances to the extent that the amount of the ring fence loss does not exceed the amount of the qualifying E&A allowances for the period of the loss.

(5) But a claim for post-commencement supplement may include an election for a ring fence loss to be treated—

(a) as attributable to qualifying E&A allowances for the period of the loss to such lesser extent as may be specified in the election, or

(b) as not attributable to such allowances.

(6) “ Qualifying E&A allowances ”, in the case of an accounting period, means allowances for that period under Part 6 of the Capital Allowances Act in respect of qualifying E&A expenditure incurred by the company (including any pre-commencement supplement treated under paragraph 9(2) as such an allowance).

(7) This paragraph has effect for the purposes of this Part of this Schedule.

Ring fence losses and non-qualifying losses

18 (1) So much of a ring fence loss as is not a qualifying E&A loss is a non-qualifying loss.

(2) Where—

(a) a loss was incurred by a qualifying company in its ring fence trade in an accounting period ending on or before 31st December 2003, and

(b) some or all of that loss falls to be set off under section 393 against profits of that trade in accounting periods ending on or after that date,

so much of the loss as falls to be so set off is a ring fence loss and that loss is a non-qualifying loss.

(3) This paragraph has effect for the purposes of this Part of this Schedule.

Special rule for straddling periods

18A (1) This paragraph applies in any case where the period of the loss in which a ring fence loss is incurred is the deemed accounting period under paragraph 3(3) ending before 1st January 2006.

(2) The following assumption shall be made for the purpose of calculating the amount of the qualifying E&A loss and the amount of the non-qualifying loss.

(3) The assumption is that the loss made in the trade is taken to be the loss incurred in the accounting period beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)).

(4) The amount of the non-qualifying loss (found in accordance with that assumption) is then reduced (but not below nil) by the following amount.

(5) The amount is the amount of the ring fence loss in the deemed accounting period beginning on 1st January 2006 determined under section 324 of CTA 2010 .

The pool of qualifying E&A losses and the pool of non-qualifying losses

19 (1) For the purpose of determining the amount of any post-commencement supplement, a qualifying company shall be taken at all times in its post-commencement periods to have—

(a) a continuing pool of the company’s non-qualifying losses (the “non-qualifying pool”), and

(b) a continuing mixed pool of the company’s qualifying E&A losses and post-commencement supplement (the “qualifying pool”).

(2) A pool continues even if the amount in it is nil.

The non-qualifying pool

20 (1) The non-qualifying pool consists of the company’s non-qualifying losses, allocated to the pool in accordance with sub-paragraph (2).

(2) A non-qualifying loss is allocated to the pool by adding the amount of the non-qualifying loss to the pool in the period of the loss.

(3) In the case of a non-qualifying loss incurred in an accounting period ending on or before 31st December 2003, the period of the loss shall be taken for the purposes of sub-paragraph (2) to be the first accounting period of the company that ends on or after 1st January 2004.

(4) The amount in the non-qualifying pool is subject to reductions in accordance with the following provisions of this Part of this Schedule.

(5) Where a reduction in the amount in the non-qualifying pool falls to be made in any accounting period—

(a) the reduction is to be made after the addition to the pool of any non-qualifying loss allocated to the pool in that period in accordance with sub-paragraph (2), and

(b) references to the amount in the non-qualifying pool shall be construed accordingly.

The qualifying pool

21 (1) The qualifying pool consists of—

(a) the company’s qualifying E&A losses, allocated to the pool in accordance with sub-paragraph (2)(a), and

(b) the company’s post-commencement supplement, allocated to the pool in accordance with sub-paragraph (2)(b).

(2) The allocation of qualifying E&A losses and post-commencement supplement to the pool is as follows—

(a) the amount of a qualifying E&A loss is added to the pool in the period of the loss, and

(b) if any post-commencement supplement is allowed on a claim in respect of a post-commencement period, the amount of that supplement is added to the pool in that period.

(3) The amount in the qualifying pool is subject to reductions in accordance with the following provisions of this Part of this Schedule.

(4) Where a reduction in the amount in the qualifying pool falls to be made in any accounting period, the reduction is to be made—

(a) after the addition to the pool of the amount of any qualifying E&A losses allocated to the pool in that period in accordance with sub-paragraph (2)(a), but

(b) before determining, and adding to the pool, the amount of any supplement claimed in respect of the period,

and references to the amount in the pool shall be construed accordingly.

Reductions in respect of utilised ring fence losses

22 (1) If one or more ring fence losses are set off under section 393 against any profits of a post-commencement period, reductions shall be made in that period in accordance with this paragraph.

(2) The amount in the non-qualifying pool shall be reduced (but not below nil) by setting against it a sum equal to the total amount so set off.

(3) If any of that sum remains after being so set against the amount in the non-qualifying pool, the amount in the qualifying pool shall be reduced (but not below nil) by setting against it so much of that sum as so remains.

(4) If the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006 (“the deemed accounting period”), the amount of the profits of the deemed accounting period is determined as follows.

(5) The amount of the profits of the straddling period is apportioned to the deemed accounting period in proportion to the number of days in the deemed accounting period that fall in the straddling period.

(6) The apportioned amount is taken for the purposes of this paragraph to be the amount of the profits of the deemed accounting period.

(7) In this paragraph “ the straddling period ”, in relation to a qualifying company, means an accounting period of the company beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)).

Reductions in respect of unrelieved group ring fence profits

23 (1) If there is an amount of unrelieved group ring fence profits for a post-commencement period, reductions shall be made in that period in accordance with this paragraph.

(2) In the following provisions of this paragraph, references to the remaining amount in a pool are references to so much (if any) of the amount in the pool as remains after making any reductions that fall to be made in accordance with paragraph 22.

(3) The remaining amount in the non-qualifying pool shall be reduced (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.

(4) If any of that sum remains after being so set against the remaining amount in the non-qualifying pool, the remaining amount in the qualifying pool shall be reduced (but not below nil) by setting against it so much of that sum as so remains.

The reference amount for a post-commencement period

24 For the purposes of this Part of this Schedule the reference amount for a post-commencement period is so much of the amount in the qualifying pool as remains after making any reductions required by paragraph 22 or 23.

SCHEDULE 19C

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SCHEDULE 20

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Sections 570 and 572.

SCHEDULE 21 TAX RELIEF IN CONNECTION WITH SCHEMES FOR RATIONALIZING INDUSTRY AND OTHER REDUNDANCY SCHEMES

PART I PRELIMINARY

1 (1) In this Schedule—

“ scheme ” means a scheme which is for the time being certified or has at any time been certified by the Secretary of State under section 568;
“ payment ” means a payment made under a scheme, being a payment made to a person carrying on a trade to which the scheme relates and not being a payment made by way of repayment of contributions;
“ the person chargeable ” means, in relation to any such payment, the person liable to pay any tax which may fall to be paid by reason of the receipt of the payment;
“ damage ” includes any loss, liability, expense or other burden, and references to the amount of any damage are references to the sum which would be fair compensation for that damage;
“ contribution ” includes part of a contribution, and “ deductible contribution ” means a contribution allowed to be deducted under section 568, any reduction under Part III of this Schedule being left out of account; and
“ asset ” includes part of an asset.

(2) For the purposes of this Schedule, a sum received by any person by way of repayment of contributions shall be deemed to be by way of repayment of the last contribution paid by him, and, if the sum exceeds the amount of that contribution, by way of repayment of the penultimate contribution so paid, and so on.

PART II RELIEF IN RESPECT OF CERTAIN PAYMENTS

2 The question whether any, and if so, what, relief is to be given shall be determined separately in relation to each payment made under the scheme in respect of the trade, but for the purpose of determining that question regard shall be had, as provided by the following provisions of this Part of this Schedule, to the sum (“the total payment”) produced by adding the amount of the payment to the amount of any payments previously so made.

3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 No relief shall be given in respect of the payment unless the total payment, or the amount of the damage in respect of which the total payment has been made, whichever is the smaller, exceeds the aggregate amount of the deductible contributions which have been paid in furtherance of the scheme in respect of the trade in question before the payment is made, exclusive of any contributions which have been repaid before the payment is made.

5 The amount of the reduction to be made in respect of the payment shall be arrived at by—

(a) ascertaining the sum which bears to the excess mentioned in paragraph 4 above the same proportion that the amount mentioned in paragraph 3(b) above bears to the amount mentioned in paragraph 3(a); and

(b) deducting from that sum the total amount of any reductions which have been or fall to be made under this Schedule in respect of payments previously made under the scheme in respect of the trade.

6 (1) For the purposes of this Schedule, and subject to sub-paragraph (2) below, damage shall be deemed to be damage in respect of which relief may be given under the Tax Acts if and only if—

(a) the damage is attributable to any of the following events, that is to say, the demolition, destruction or putting out of use of any asset, or the disposition or termination of an interest in any asset, and, by reason of that event, an allowance falls to be made under Part 2 or 3 of the Capital Allowances Act in calculating the profits of a trade ; or

(b) the damage consists of any loss, liability, expense or other burden in respect of which an allowance may be made in computing the profits of the trade for the purposes of the Tax Acts.

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

(3) Where any event occurs which would give rise to an allowance under the Tax Acts in respect of any asset in taxing, or computing the profits of, a trade but for any of the following matters, that is to say—

(a) that there are no profits against which the allowance could be made, or

(b) that account is required to be taken of allowances previously made or deemed to have been made in respect of the asset; or

(c) that account is required to be taken of any sum which falls to be written off the expenditure incurred on the asset for the purpose of determining whether any and if so what allowance may be given by reason of the event; or

(d) that account is required to be taken of any sum falling to be taken into account as sale, insurance, salvage or compensation moneys, the like consequences shall ensue under this Schedule as if an allowance had fallen to be made by reason of that event.

(4) Where any damage is attributable to a permanent change in the purposes for which an asset is used, or the temporary or permanent putting out of use of an asset, the question whether the damage is damage in respect of which relief may be given under the Tax Acts shall be determined as if the damage had been attributable to a sale of the asset on the date upon which the change or putting out of use took place.

PART III EXCLUSION OF RELIEF IN RESPECT OF CONTRIBUTIONS PAID AFTER RELIEF HAS BEEN GIVEN UNDER PART II

7 The provisions of this Part of this Schedule shall have effect where—

(a) a contribution is paid under a scheme in respect of a trade; and

(b) before the contribution is paid, payments have been made under the scheme to the person carrying on the trade; and

(c) reductions have been made, under Part II of this Schedule, in the amounts which, by reason of those payments, are to be treated as trading receipts of the trade.

8 There shall be ascertained—

(a) the total amount of those reductions; and

(b) the sum by which that total would have been decreased if the contribution, and any previous contributions to which this Part of this Schedule applies, had been paid before any of the payments were made.

9 For the purpose of determining what deduction is to be made in respect of the contribution under section 568, the contribution shall be deemed to be reduced by the sum specified in paragraph 8(b) above, but—

(a) for the purpose of the application of paragraph 8 above in relation to contributions subsequently paid under the scheme in respect of the trade, the total amount of the reductions referred to in that paragraph shall be treated as decreased by that sum; and

(b) for the purpose of the application of paragraph 5 above in relation to payments subsequently made under the scheme in respect of the trade, the total amount of the reductions referred to in that paragraph shall be treated as decreased by that sum.

10 When two or more contributions are paid at the same time, the provisions of this Part of this Schedule shall have effect as if they were a single contribution.

SCHEDULE 22

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SCHEDULE 23

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SCHEDULE 23ZA

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Schedule 23A

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Section 747(6).

SCHEDULE 24 ASSUMPTIONS FOR CALCULATING CHARGEABLE PROFITS, CREDITABLE TAX AND CORRESPONDING UNITED KINGDOM TAX OF FOREIGN COMPANIES

General

1 (1) The company shall be assumed to be resident in the United Kingdom.

(2) Nothing in sub-paragraph (1) above requires it to be assumed that there is any change in the place or places at which the company carries on its activities.

(3) For the avoidance of doubt, it is hereby declared that, if any sums forming part of the company’s profits for an accounting period have been received by the company without any deduction of or charge to tax and have been so received by virtue of section 1279 of CTA 2009 the effect of the assumption in sub-paragraph (1) above is that those sums are to be brought within the charge to tax for the purposes of calculating the company’s chargeable profits or corresponding United Kingdom tax.

(3A) In any case where—

(a) it is at any time necessary for any purpose of Chapter IV of Part XVII to determine in the case of any person the chargeable profits of the company for an accounting period, and

(b) at that time—

(i) it has not been established in the case of that person that that or any earlier accounting period of the company is an accounting period in respect of which an apportionment under section 747(3) falls to be made, . . .

(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

in determining the chargeable profits of the company for the accounting period mentioned in paragraph (a) above, it shall be assumed, for the purposes of those provisions of paragraphs 2 and 10 below which refer to the first accounting period in respect of which an apportionment under section 747(3) falls to be made . . . , that that period (but not any earlier period) is an accounting period in respect of which such an apportionment falls to be made . . . .

(4) In any case where—

(a) it is at any time necessary for any purpose of Chapter IV of Part XVII to determine in the case of any person the chargeable profits of the company for an accounting period, and

(b) at that time it has not been established in the case of that person that that or any earlier accounting period of the company is an accounting period in respect of which an apportionment under section 747(3) falls to be made,

in determining the chargeable profits of the company for the accounting period mentioned in paragraph (a) above, it shall be assumed, for the purposes of those provisions of paragraph 9 below which refer to the first accounting period in respect of which an apportionment under section 747(3) falls to be made, that such an apportionment falls to be made in respect of that period (but not in respect of any earlier period).

(5) Nothing in this Schedule affects any liability for, or the computation of, corporation tax in respect of a trade which is carried on by a company resident outside the United Kingdom through a permanent establishment in the United Kingdom.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 (1) The company shall be assumed to have become resident in the United Kingdom (and, accordingly, within the charge to corporation tax) at the beginning of the first accounting period—

(a) in respect of which an apportionment under section 747(3) falls to be made , . . .

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

and that United Kingdom residence shall be assumed to continue throughout subsequent accounting periods of the company (whether or not an apportionment falls to be made in respect of all or any of them) until the company ceases to be controlled by persons resident in the United Kingdom.

(2) Except in so far as the following provisions of this Schedule otherwise provide, for the purposes of calculating a company’s chargeable profits or corresponding United Kingdom tax for any accounting period which is not the first such period referred to in sub-paragraph (1) above (and, in particular, for the purpose of applying any relief which is relevant to two or more accounting periods), it shall be assumed that a calculation of chargeable profits or, as the case may be, corresponding United Kingdom tax has been made for every previous accounting period throughout which the company was, by virtue of sub-paragraph (1) above, assumed to have been resident in the United Kingdom.

3 The company shall be assumed not to be a close company.

4 (1) Subject to sub-paragraph (2) below, where any relief under the Corporation Tax Acts is dependent upon the making of a claim or election, the company shall be assumed to have made that claim or election which would give the maximum amount of relief and to have made that claim or election within any time limit applicable to it , except that the company shall be assumed not to have made an election under section 18A of CTA 2009.

(1A) Sub-paragraph (2) below applies to any accounting period of the company—

(a) in respect of which an apportionment under section 747(3) falls to be made ; . . .

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

(2) Where this sub-paragraph applies to an accounting period of the company, then if, by notice given to an officer of the Board at any time not later than the expiry of the period of twenty months following the end of the accounting period or within such longer period as the Board may in any particular case allow, the United Kingdom resident company which has or, as the case may be, any two or more United Kingdom resident companies which together have, a majority interest in the company so request, the company shall be assumed—

(a) not to have made any claim or election specified in the notice; or

(b) to have made a claim or election so specified, being different from one assumed by sub-paragraph (1) above but being one which (subject to compliance with any time limit) could have been made in the case of a company within the charge to corporation tax; or

(c) to have disclaimed or required the postponement, in whole or in part, of an allowance if (subject to compliance with any time limit) a company within the charge to corporation tax could have disclaimed the allowance or, as the case may be, required such a postponement.

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2B) For the purposes of sub-paragraph (1) an election under section 9A of CTA 2010 (designated currency of a UK resident investment company) is not to be regarded as an election upon which relief under the Corporation Tax Acts is dependent, and sub-paragraph (2)(b) does not apply in relation to such an election.

(2C) But if, by notice given to an officer of the Board, the United Kingdom resident company which has or, as the case may be, any two or more United Kingdom resident companies which together have, a majority interest in the company so request, the company shall be assumed (subject to section 9A(2) of CTA 2010) to have made an election under section 9A of that Act in the form specified in the notice (and accordingly that section and section 9B of that Act apply to determine the effect (if any) of that election).

(3) For the purposes of this paragraph, a United Kingdom resident company has, or two or more United Kingdom resident companies together have, a majority interest in the company if on the apportionment of the company’s chargeable profits for the relevant accounting period under section 747(3) more than half of the amount of those profits—

(a) which are apportioned to all United Kingdom resident companies, and

(b) which give rise to any liability on any such companies under subsection (4)(a) of that section,

are apportioned to the United Kingdom resident company or companies concerned.

(3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In sub-paragraph (3) above “ the relevant accounting period ” means the accounting period or, as the case may be, the first accounting period in which the relief in question is or would be available in accordance with sub-paragraph (1) above.

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Group relief etc.

5 (1) The company shall be assumed to be neither a member of a group of companies nor a member of a consortium for the purposes of any provision of the Tax Acts.

(2) Where, under Part 5 of CTA 2010 , any relief is in fact surrendered by the company and allowed to another company by way of group relief, it shall be assumed that the chargeable profits of the company, apart from this paragraph, are to be increased by an amount of additional profits equal to the amount of the relief so surrendered and allowed.

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7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Company reconstructions

8 Without prejudice to the operation of Chapter 1 of Part 22 of CTA 2010 in a case where the company is the predecessor, within the meaning of that Chapter , and a company resident in the United Kingdom is the successor, within the meaning of that Chapter —

(a) the assumption that the company is resident in the United Kingdom shall not be regarded as requiring it also to be assumed that the company is within the charge to tax in respect of a trade for the purposes of that Chapter , and

(b) except in so far as the company is actually within that charge (by carrying on the trade through a permanent establishment in the United Kingdom), it shall accordingly be assumed that the company can never be the successor, within the meaning of that Chapter , to another company (whether resident in the United Kingdom or not).

Losses in pre-direction accounting periods

9 (1) . . . This paragraph applies in any case where the company incurred a loss in a trade in an accounting period—

(a) which precedes the first accounting period in respect of which an apportionment under section 747(3) falls to be made (“ the starting period ”); and

(b) which ended less than six years before the beginning of the starting period; and

and in this paragraph any such accounting period is referred to as a “ pre-apportionment period ”.

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

(3) If a claim is made for the purpose by the United Kingdom resident company or companies referred to in paragraph 4(2) above, the chargeable profits (if any) of the company for accounting periods beginning with that pre-apportionment period which is specified in the claim and in which a loss is incurred as mentioned in sub-paragraph (1) above shall be determined (in accordance with the provisions of this Schedule other than this paragraph) on the assumption that that pre-apportionment period was the first accounting period in respect of which an apportionment under section 747(3) fell to be made .

(4) A claim under sub-paragraph (3) above shall be made by notice given to an officer of the Board within the period of twenty months following the end of the starting period or within such longer period as the Board may in any particular case allow.

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

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Nothing in—

(a) paragraph 10 of Schedule 18 to the Finance Act 1998 (claims or elections in company tax returns), or

(b) Schedule 1A to the Management Act (claims or elections not included in returns),

shall apply, whether by virtue of section 754 or otherwise, to a claim under sub-paragraph (3) above.

Capital allowances and expenditure on car hire

10 (1) Subject to paragraph 12 below, if, in an accounting period falling before the beginning of the first accounting period—

(a) in respect of which an apportionment under section 747(3) falls to be made , . . .

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

the company incurred any capital expenditure on the provision of plant or machinery for the purposes of its trade, that plant or machinery shall be assumed, for the purposes of Part 2 of the Capital Allowances Act , to have been provided for purposes wholly other than those of the trade and not to have been brought into use for the purposes of that trade until the beginning of that first accounting period, and section 13 of that Act (use for qualifying activity of plant or machinery provided for other purposes) shall apply accordingly.

(2) This paragraph shall be construed as one with Part 2 of the Capital Allowances Act .

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11A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unremittable overseas income

12 For the purposes of the application of Part 18 of CTA 2009 to the company’s income it shall be assumed—

(a) that any reference in section 1274(3) or (4) of that Act to the United Kingdom is a reference to both the United Kingdom and the territory in which the company is in fact resident; and

(b) that a claim under section 1275 of that Act (claim for relief for unremittable income) may be made on behalf of the company by the United Kingdom resident company or companies referred to in paragraph 4(2) above.

Exchange gains and losses

13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfer pricing

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Section 748.

SCHEDULE 25 Cases where section 747(3) does not apply

PART I ACCEPTABLE DISTRIBUTION POLICY

PART II EXEMPT ACTIVITIES

5 (1) The provisions of this Part of this Schedule have effect for the purposes of paragraph (b) of subsection (1) of section 748.

(1A) Except as provided in paragraph 8 below, the provisions of this Part of this Schedule apply in relation to a company which is resident in an EEA territory in the same way as they apply in relation to a company which is resident elsewhere.

(2) In the case of a controlled foreign company—

(a) which is, by virtue of section 749(5) , presumed to be resident in a territory in which it is subject to a lower level of taxation, and

(b) the business affairs of which are, throughout the accounting period in question, effectively managed in a territory outside the United Kingdom other than one in which companies are liable to tax by reason of domicile, residence or place of management,

references in the following provisions of this Part of this Schedule to the territory in which that company is resident shall be construed as references to the territory falling within paragraph (b) above, or, if there is more than one, to that one of them which may be notified to the Board by the United Kingdom resident company or companies referred to in paragraph 4(2) of Schedule 24.

(3) In the case of a controlled foreign company—

(a) which is, by virtue of section 749(5), presumed to be resident in a territory in which it is subject to a lower level of taxation,

(b) the business affairs of which are, throughout the accounting period in question, effectively managed in a special administrative region, and

references in the following provisions of this Part of this Schedule to the territory in which that company is resident shall be construed as references to that region.

(4) In sub-paragraph (3) above “ special administrative region ” means the Hong Kong or the Macao Special Administrative Region of the People’s Republic of China.

(5) Where sub-paragraph (3) above applies, it applies in place of sub-paragraph (2).

6 (1) Throughout an accounting period a controlled foreign company is engaged in exempt activities if, and only if, each of the following conditions is fulfilled—

(a) that, throughout that accounting period, the company has a business establishment in the territory in which it is resident; and

(b) that, throughout that accounting period, its business affairs in that territory are effectively managed there; and

(2) This sub-paragraph applies to a company if—

(a) at no time during the accounting period in question does the main business of the company consist of either—

(i) investment business, or

(ii) dealing in goods for delivery to or from the United Kingdom or to or from connected or associated persons; and

(b) in the case of a company which is mainly engaged in wholesale, distributive financial or service business in that accounting period, less than 50 per cent. of its gross trading receipts from that business is derived directly or indirectly from persons falling within sub-paragraph (2A) below.

(2A) Those persons are—

(a) persons who are connected or associated with the company;

(b) persons who have a 25 per cent assessable interest in the company in the case of the accounting period in question; . . .

(c) if the company is a controlled foreign company in that accounting period by virtue of subsection (1A) of section 747, persons who are connected or associated with either or both of the two persons mentioned in that subsection ;

(d) persons not falling within paragraphs (a) to (c) above which are companies resident in the United Kingdom;

(e) persons not falling within paragraphs (a) to (c) above which are companies not resident in the United Kingdom which carry on business through a permanent establishment in the United Kingdom;

(f) persons not falling within paragraphs (a) to (c) above who are individuals habitually resident in the United Kingdom;

but where the company is a controlled foreign company falling within sub-paragraph (2B) below, paragraphs (d) to (f) above shall be disregarded.

(2B) A controlled foreign company falls within this sub-paragraph if either—

(a) its main business is the effecting or carrying out of contracts of long-term insurance, other than protection business; or

(b) it is a member of an insurance group and its main business is insuring or reinsuring large risks.

Paragraph 11A below has effect for the interpretation of this sub-paragraph.

(2C) For the purposes of sub-paragraph (2)(b) above, a company’s gross trading receipts from a business shall be regarded as directly or indirectly derived from a person falling within sub-paragraph (2A)(e) above only to the extent that they are derived directly or indirectly from contracts or other arrangements relating to that person’s permanent establishment in the United Kingdom.

(3) This sub-paragraph applies to a company which is a holding company if at least 90 per cent. of its gross income during the accounting period in question is received by it in the territory in which it is resident and is derived directly from companies which it controls and which, throughout that period—

(a) are resident in the territory in which the holding company is resident; and

(b) are not themselves holding companies . . . , but otherwise are, in terms of this Schedule, engaged in exempt activities or are, in terms of sub-paragraph (5A) below, exempt trading companies ;

and a holding company to which this sub-paragraph applies is in this Part of this Schedule referred to as a “ local holding company ”.

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

(4ZA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4AA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4BB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4C) For the purposes of sub-paragraph (2A)(b) above, a person has a 25 per cent. assessable interest in a controlled foreign company in the case of an accounting period of the company if, on an apportionment of the chargeable profits and creditable tax (if any) of the company for that accounting period under section 747(3), at least 25 per cent. of the controlled foreign company’s chargeable profits for the accounting period would be apportioned to that person.

(5) Any reference in sub-paragraph (3) above to a company which a holding company . . . controls includes a reference to a trading company to which sub-paragraph (5ZA) or (5ZB) below applies.

(5ZA) This sub-paragraph applies to a trading company in which the holding company . . . holds the maximum amount of ordinary share capital which is permitted under the law of the territory—

(a) in which the trading company is resident; and

(b) from whose laws the trading company derives its status as a company.

(5ZB) This sub-paragraph applies to a trading company if—

(a) it is a controlled foreign company by virtue of subsection (1A) of section 747; and

(b) the person who satisfies the requirement in paragraph (b) of that subsection in relation to the company also controls the holding company . . . .

(5A) For the purposes of sub-paragraph (3) above, a company is an exempt trading company throughout any period if—

(a) it is a trading company throughout each of its accounting periods which falls wholly or partly within that period; and

(b) each of those accounting periods is one as regards which—

(i) the condition in section 747(1)(c) is not satisfied; or

(ii) the conditions in section 748(1)(e) are satisfied; or

(iii) the conditions in section 748(3)(a) and (b) are satisfied.

(5B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5C) For the purposes of this paragraph, the gross income of a holding company . . . during an accounting period includes—

(a) any income which accrues during that period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary, and

(b) any income which accrues during that period to a partnership of which the company is a partner, apportioned between the company and the other partners on a just and reasonable basis.

(5D) Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (5C)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis.

(5E) In sub-paragraph (5C)(b) “ partnership ” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.

(6) The following provisions of this Part of this Schedule have effect in relation to this paragraph .

7 (1) For the purposes of paragraph 6(1)(a) above, a “ business establishment ”, in relation to a controlled foreign company, means premises—

(a) which are, or are intended to be, occupied and used with a reasonable degree of permanence; and

(b) from which the company’s business in the territory in which it is resident is wholly or mainly carried on.

(2) For the purposes of sub-paragraph (1) above the following shall be regarded as premises—

(a) an office, shop, factory or other building or part of a building; or

(b) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; or

but such a site as is referred to in paragraph (c) above shall not be regarded as premises unless the building work or the project, as the case may be, has a duration of at least twelve months.

8 (1) Subject to sub-paragraph (4) below, the condition in paragraph 6(1)(b) above shall not be regarded as fulfilled in relation to a company which is not resident in an EEA territory unless—

(a) the number of persons employed by the company in the territory in which it is resident is adequate to deal with the volume of the company’s business; and

(b) any services provided by the company for persons resident outside that territory are not in fact performed in the United Kingdom.

(2) For the purposes of sub-paragraph (1)(a) above, persons who are engaged wholly or mainly in the business of the company and whose remuneration is paid by a person connected with, and resident in the same territory as, the company shall be treated as employed by the company.

(3) In the case of a holding company . . . , sub-paragraph (2) above shall apply with the omission of the words “wholly or mainly”.

(4) For the purposes of sub-paragraph (1)(b) above, no account shall be taken of services—

(a) provided through a permanent establishment of the controlled foreign company if the profits or gains of the business carried on through the permanent establishment are within the charge to tax in the United Kingdom; or

(b) provided through any other person whose profits or gains from the provision of the services are within the charge to tax in the United Kingdom and who provides the services for a consideration which is, or which is not dissimilar from what might reasonably be expected to be, determined under a contract entered into at arm’s length; or

(5) The condition in paragraph 6(1)(b) above shall not be regarded as fulfilled in relation to a company which is resident in an EEA territory unless there are sufficient individuals working for the company in the territory who have the competence and authority to undertake all, or substantially all, of the company's business.

(6) For the purposes of sub-paragraph (5) above, individuals are not to be regarded as working for a company in any territory unless—

(a) they are employed by the company in the territory, or

(b) they are otherwise directed by the company to perform duties on its behalf in the territory.

9 (1) Subject to sub-paragraph (3) below, for the purposes of paragraph 6(2)(a)(i) above, each of the following activities constitutes investment business—

(a) the holding of securities, or intellectual property ;

(b) dealing in securities, other than in the capacity of a broker;

(d) the investment in any manner of funds which would otherwise be available, directly or indirectly, for investment by or on behalf of any person (whether resident in the United Kingdom or not) who has, or is connected or associated with a person who has, control, either alone or together with other persons, of the controlled foreign company in question.

(1A) In sub-paragraph (1)(a) above “ intellectual property ” includes (in particular)—

(a) any industrial, commercial or scientific information, knowledge or expertise;

(b) any patent, trade mark, registered design, copyright or design right;

(d) any rights under the law of a country outside the United Kingdom which correspond or are similar to those falling within paragraph (b) or (c) above.

(2) In sub-paragraph (1)(b) above “ broker ” includes any person offering to sell securities to, or purchase securities from, members of the public generally.

(3) For the purposes of paragraph 6(2) above, in the case of a company which is mainly engaged in business falling within paragraph 11(1)(c) below, nothing in sub-paragraph (1) above shall require the main business of the company to be regarded as investment business.

10 Goods which are actually delivered into the territory in which the controlled foreign company is resident shall not be taken into account for the purposes of paragraph 6(2)(a)(ii) above.

11 (1) For the purposes of paragraph 6(2)(b) above, each of the following activities constitutes wholesale, distributive financial or service business—

(a) dealing in any description of goods wholesale rather than retail;

(b) the business of shipping or air transport, that is to say, the business carried on by an owner of ships or the business carried on by an owner of aircraft (“ owner ” including, for this purpose, any charterer);

(c) banking, deposit-taking, money-lending or debt-factoring, or any business similar to banking, deposit-taking, money-lending or debt-factoring;

(d) the administration of trusts;

(e) dealing in securities in the capacity of a broker, as defined in paragraph 9(2) above;

(f) dealing in commodity or financial futures; . . .

(g) the effecting or carrying out of contracts of insurance; and

(h) the provision of services not falling within any of the preceding paragraphs.

(1A) For the purposes of sub-paragraph (1)(g) above “contract of insurance” has the meaning given by Article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

(2) In a case where the gross trading receipts of a company include an amount in respect of the proceeds of sale of any description of property or rights, the cost to the company of the purchase of that property or those rights shall be a deduction in calculating the company’s gross trading receipts for the purposes of paragraph 6(2)(b) above.

(3) In the case of a controlled foreign company engaged in a business falling within sub-paragraph (1)(c) above—

(a) no payment of interest received from a company resident in the United Kingdom which is connected or associated with the controlled foreign company shall be regarded for the purposes of paragraph 6(2)(b) above as a receipt derived directly or indirectly from a person falling within paragraph 6(2A) above, but

(b) it shall be conclusively presumed that the condition in paragraph 6(2)(b) above is not fulfilled if, at any time during the accounting period in question, the amount by which the aggregate value of the capital interests in the company held directly or indirectly by—

(i) the persons who have control of the company, and

(ii) any person connected or associated with those persons,

exceeds the value of the company’s fixed assets is 15 per cent. or more of the amount by which the company’s outstanding capital exceeds that value , and

(c) it shall also be conclusively presumed that the condition in paragraph 6(2)(b) is not fulfilled if 10% or more of the company’s gross trading receipts from all businesses carried on by it in the accounting period in question, taken together, are receipts other than interest and are directly or indirectly derived from persons—

(i) which are companies resident in the United Kingdom,

(ii) which are companies not resident in the United Kingdom but which carry on business through a permanent establishment in the United Kingdom, or

(iii) who are individuals habitually resident in the United Kingdom,

but for this purpose a company’s gross trading receipts shall be regarded as directly or indirectly derived from a person falling within sub-paragraph (ii) above only to the extent that they are derived directly or indirectly from contracts or other arrangements relating to that person’s permanent establishment in the United Kingdom.

(4) For the purposes of this paragraph, in relation to a controlled foreign company—

(a) “ capital interest ” means an interest in the issued share capital or reserves of the company or in a loan to or deposit with the company or the liability of a guarantor under a guarantee given to or for the benefit of the company;

(b) except in the case of the liability of a guarantor, the value of a capital interest is its value as shown in the company’s accounts;

(c) in the case of the liability of a guarantor, the value shall be taken to be the market value of the benefit which the controlled foreign company derives from the provision of the guarantee;

(d) the value of the company’s fixed assets means the value, as shown in the company’s accounts, of the plant, premises and trade investments employed in the company’s business; and

(e) “ outstanding capital ” means the total value of all the capital interests in the company, less the value, as shown in the company’s accounts, of any advances made by the company to persons resident outside the United Kingdom and falling within paragraph (i) or paragraph (ii) of sub-paragraph (3)(b) above.

(5) For the purposes of sub-paragraph (4) above—

(a) “ trade investments ”, in relation to a controlled foreign company, means securities any profit on the sale of which would not be brought into account as a trading receipt in computing the chargeable profits of an accounting period in which that profit arose; and

(b) the reference in paragraph (e) to advances made to a person by the controlled foreign company includes, in the case of a company which is a person resident outside the United Kingdom and falling within paragraph (i) or paragraph (ii) of sub-paragraph (3)(b) above, any securities of that company which are held by the controlled foreign company but are not trade investments, as defined in paragraph (a) above;

and in this sub-paragraph “ securities ” includes stocks and shares.

(6) In the application of paragraph 6(2)(b) above in the case of a controlled foreign company engaged in insurance business of any kind—

(a) the reference to gross trading receipts which are derived directly or indirectly from connected or associated persons is a reference to those which, subject to sub-paragraph (7) below, are attributable, directly or indirectly, to liabilities undertaken in relation to any of those persons or their property;

(b) the only receipts to be taken into account are commissions and premiums received under insurance contracts;

(d) when a liability under an insurance contract is reinsured, in whole or in part, the amount of the premium which is attributable, directly or indirectly, to that liability shall be treated as reduced by so much of the premium under the reinsurance contract as is attributable to that liability.

(7) In determining, in relation to a controlled foreign company to which sub-paragraph (6) above applies, the gross trading receipts referred to in paragraph (a) of that sub-paragraph, there shall be left out of account any receipts under a local reinsurance contract which are attributable to liabilities which—

(a) are undertaken under an insurance contract made in the territory in which the company is resident; and

(b) are not reinsured under any contract other than a local reinsurance contract; and

(c) relate either to persons who are resident in that territory and are neither connected nor associated with the company or to property which is situated there and belongs to persons who are not so connected or associated;

and in paragraph (a) above “ insurance contract ” does not include a reinsurance contract.

(8) In sub-paragraph (7) above “ local reinsurance contract ” means a reinsurance contract—

(a) which is made in the territory in which the controlled foreign company is resident; and

(b) the parties to which are companies which are resident in that territory.

(9) For the purposes of sub-paragraphs (7) and (8) above, any question as to the territory in which a company is resident shall be determined in accordance with section 749 and, where appropriate, paragraph 5(2) above; and, for the purpose of the application of those provisions in accordance with this sub-paragraph, the company shall be assumed to be a controlled foreign company.

11A (1) This paragraph has effect for the interpretation of paragraph 6(2B) above.

(2) “ Contract of long-term insurance ” means any contract falling within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

(3) “ Protection business ” means contracts of long-term insurance where—

(a) either—

(i) the contract has no surrender value; or

(ii) the consideration consists of a single premium and the surrender value does not exceed the amount of that premium; and

(b) the contract makes no provision for its conversion or extension in a manner which would result in its ceasing to fall within paragraph (a) above;

and references to protection business include a reference to reinsurance of protection business.

(4) “ Insurance group ” shall be construed in accordance with section 1165(5) of the Companies Act 2006, but does not include such an insurance group if it falls within sub-paragraph (5) below.

(5) Such an insurance group falls within this sub-paragraph if . . . the parent company is a subsidiary undertaking of a parent company which is neither—

(a) the parent company of an insurance group; nor

(b) a subsidiary undertaking of the parent company of an insurance group.

(6) A controlled foreign company is, in accordance with sub-paragraphs (4) and (5) above, a “ member of an insurance group ” if (within the meaning of that Part as so read) it is the parent company, or a subsidiary undertaking of the parent company, of an insurance group which is by virtue of sub-paragraph (4) above an insurance group for the purposes of paragraph 6(2B) above.

(7) A company’s main business is “ insuring or reinsuring large risks ” if (and only if)—

(a) the company’s main business is the effecting or carrying out of contracts of insurance; and

(b) 50% or more of its gross trading receipts from that business are derived from insuring or reinsuring large risks.

“ Large risks ” is defined in paragraph 11B below.

(8) In this paragraph—

“ contract of insurance ” has the meaning given by article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;
“ contract of long-term insurance ” has the meaning given by sub-paragraph (2) above.

11B (1) In paragraph 11A above “ large risks ” means—

(a) risks falling within classes 4, 5, 6, 7, 11 and 12 of Part I of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

(b) risks falling within classes 14 and 15 of that Part which relate to a business carried on by the policy holder;

(c) risks falling within classes 3, 8, 9, 10, 13 and 16 of that Part where the policy holder carries on a business in respect of which the condition specified in sub-paragraph (2) below is satisfied.

(2) The condition referred to in sub-paragraph (1)(c) above is that, in the case of that business of the policy holder, at least two of the three following criteria were exceeded in the most recent financial year beginning on or after 1st January 1999 for which the information is available—

(a) balance sheet total: 6.2 million euros;

(b) net turnover: 12.8 million euros;

(3) For the purposes of sub-paragraph (2) above as it applies where the policy holder is a company, within the meaning of section 1 of the Companies Act 2006 . . . ,—

(a) “ balance sheet total ” has the meaning given by sections 382(5) and 465(5) of the Companies Act 2006 ;

(b) “ net turnover ” has the meaning given to “ turnover ” by section 474(1) of that Act ; and

and for a financial year which is a company’s financial year but not in fact a year, the net turnover of the company shall be proportionately reduced.

(4) Where the policy holder is a member of a group for which consolidated accounts (within the meaning of Directive

(5) For the purposes of sub-paragraph (1)(c) above as it applies where the policy holder is a professional association, joint venture or temporary grouping, the question whether the condition in sub-paragraph (2) above is met shall be determined by reference to the aggregate of the figures of the description in question for all the members of the professional association, joint venture or temporary grouping.

(6) In sub-paragraphs (1) to (5) above “ business ” includes a trade or profession and, for the purposes of sub-paragraph (1)(c) above, any activity of a professional association, joint venture or temporary grouping.

(7) For the purposes of this paragraph, where an amount is denominated in any accounts in a currency other than the euro, it shall be converted into its equivalent in euros using the London closing exchange rate for that currency and the euro for the last day of the period to which the accounts relate.

(8) In this paragraph—

“ euro ” means the single currency adopted or proposed to be adopted as its currency by a member State in accordance with the Treaty establishing the European Community;
“ financial year ”, in relation to any person, means the period (not exceeding 12 months) for which that person makes up accounts.

12 (1) Subject to sub-paragraph (2) below, in paragraphs 6 and 8(3) above and in sub-paragraphs (4) and (5) below “ holding company ” means—

(a) a company the business of which consists wholly or mainly in the holding of shares or securities of companies which are either local holding companies and its 90 per cent. subsidiaries or trading companies and either its 51 per cent. subsidiaries or companies falling within paragraph 6(5) above; or

(b) a company which would fall within paragraph (a) above if there were disregarded so much of its business as consists in the holding of property or rights of any description for use wholly or mainly by companies which it controls and which are resident in the territory in which it is resident.

(2) In determining whether a company is a holding company for the purposes of paragraph 6(3) above (and, accordingly, whether the company is or may be a local holding company), sub-paragraph (1) above shall have effect with the omission from paragraph (a) thereof of the words “either local holding companies and its 90 per cent. subsidiaries or”.

(3) In its application for the purposes of this paragraph, section 1154 of CTA 2010 has effect with the omission of the following—

(a) in subsection (2), the words “or indirectly”, and

(b) subsection (5).

(4) For the purposes of sub-paragraph (3) . . . of paragraph 6 above, as it applies in relation to a holding company part of whose business consists of activities other than the holding of shares or securities or the holding of property or rights as mentioned in paragraph (a) or (b) of sub-paragraph (1) above, the company’s gross income during any accounting period shall be determined as follows—

(a) there shall be left out of account so much of what would otherwise be the company’s gross income as is derived from any activity which, if it were the business in which the company is mainly engaged, would be such that paragraph 6(2) above would apply to the company; and

(b) to the extent that the receipts of the company from any other activity include receipts from the proceeds of sale of any description of property or rights, the cost to the company of the purchase of that property or those rights shall (to the extent that the cost does not exceed the receipts) be a deduction in calculating the company’s gross income, and no other deduction shall be made in respect of that activity.

(5) For the purposes of sub-paragraph (3) of paragraph 6 above, so much of the income of a holding company as—

(a) is derived directly from another company which it controls and which is not a holding company . . . but otherwise is, in terms of this Schedule, engaged in exempt activities or, in terms of sub-paragraph (5A) of that paragraph, is an exempt trading company , and

(b) was or could have been paid out of any non-trading income of that other company which is derived directly or indirectly from a third company connected or associated with it,

shall be treated, in relation to the holding company, as if it were not derived directly from companies which it controls.

(6) The reference in sub-paragraph (5) above to the non-trading income of a company is a reference to so much of its income as, if the company were carrying on its trade in the United Kingdom, would not be within the charge to corporation tax under section 35 of CTA 2009 .

12A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 2A Trading Companies with Limited UK Connection

Introductory

12B (1) For the purposes of section 748(1)(ba), a controlled foreign company (“C”) is exempt for an accounting period if the requirements of this Part of this Schedule are satisfied.

(2) The requirements are those imposed as to C's—

(a) business establishment (see paragraph 12C),

(b) business activities (see paragraph 12D),

(d) finance income and relevant IP income (see paragraph 12F).

Business establishment

12C (1) The requirement of this paragraph is that throughout the accounting period C has a business establishment in the territory in which it is resident.

(2) For the purposes of sub-paragraph (1)—

(a) paragraph 5(2) to (5) (special rules about residence of the company) applies as it applies for the purposes of Part 2 of this Schedule, and

(b) paragraph 7 (meaning of “business establishment”) applies as it applies for the purposes of paragraph 6(1)(a).

Business activities

12D (1) The requirement of this paragraph is that—

(a) C's business does not, at any time during the accounting period, include to a substantial extent non-exempt activities, or

(b) if C is wholly engaged in business falling within paragraph 11(1)(c) (banking etc), C's business does not, at any time during the accounting period, include to a substantial extent non-exempt activities which do not constitute investment business.

(2) For this purpose—

“ non-exempt activities ” means—
(a)
the holding or managing of shares or securities,
(b)
the holding of intellectual property,
(c)
dealing in securities, other than in the capacity of a broker,
(d)
the leasing of any description of property or rights,
(e)
the investment in any manner of funds which would otherwise be available, directly or indirectly, for investment by or on behalf of any person (whether resident in the United Kingdom or not) who has, or is connected or associated with a person who has, control, either alone or together with other persons, of C, and
(f)
if C is not a member of an insurance group throughout the accounting period, the effecting or carrying out of contracts of insurance between C and persons related to C;
“ investment business ” means activities within paragraphs (a) to (d) of paragraph 9(1).

(3) For the purposes of sub-paragraph (2)(f), a person is “related” to C if—

(a) the person is connected or associated with C,

(b) the person has a 25 per cent assessable interest in C in the case of the accounting period in question (within the meaning of paragraph 6(4C)), or

(c) if C is a controlled foreign company in that accounting period by virtue of subsection (1A) of section 747, the person is connected or associated with either or both of the two persons mentioned in that subsection.

(4) In sub-paragraph (2)—

“ broker ” includes any person offering to sell securities to, or purchase securities from, members of the public generally;
“ contract of insurance ” has the meaning given by Article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;
“ insurance group ” has the meaning given by paragraph 11A(4);
“ intellectual property ” is to be construed in accordance with paragraph 9(1A);
“ member of an insurance group ” has the meaning given by paragraph 11A(6).

UK connection

12E (1) The requirement of this paragraph is that C does not have a significant connection with the United Kingdom during the accounting period.

(2) C has a significant connection with the United Kingdom during the accounting period if Condition A or B is met.

(3) Condition A is that—

(a) the UK-connected gross income of C's business for that period exceeds 10% of the gross income of that business for that period, and

(b) sub-paragraph (4) does not apply.

(4) This sub-paragraph applies if—

(a) at all times in the accounting period there are sufficient individuals working for C in the territory in which it is resident, or in any other territory outside of the United Kingdom, who have the competence and authority to undertake all, or substantially all, of C's business,

(b) C's relevant profits for the accounting period do not exceed 10% of C's relevant operating expenses for that period, and

(c) the UK-connected gross income of C's business for that period does not exceed 50% of the gross income of that business for that period.

(5) Condition B is that—

(a) the UK-connected related-party business expenditure of C's business for that period exceeds 50% of the total related-party business expenditure of C's business for that period, and

(b) during the accounting period C has been involved in a scheme where the main purpose, or one of the main purposes, of any party to the scheme in entering into the scheme is to achieve a reduction in corporation tax or any tax chargeable as if it were corporation tax.

(6) For the purposes of sub-paragraph (4)(a), individuals are not to be regarded as working for C in any territory unless—

(a) they are employed by C in the territory, or

(b) they are otherwise directed by C to perform duties on its behalf in the territory.

(7) In this paragraph—

“ related-party business expenditure ” means any expenditure, other than capital expenditure, which gives rise, directly or indirectly, to income of a person related to C;
“relevant profits”, for an accounting period, means the total profits of C for that period calculated in accordance with generally accepted accounting practice (disregarding any capital gains or losses), but before any deduction for interest or tax;
“relevant operating expenses” of C means operating expenses of C other than—
(a)
the cost of goods sold, and
(b)
related-party business expenditure;
“ scheme ” means any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving one or more transactions;
“ UK-connected gross income ” means the gross income derived, directly or indirectly, from persons who are within the charge to United Kingdom tax for all or part of the accounting period;
“ UK-connected related-party business expenditure ” means related-party business expenditure which gives rise, directly or indirectly, to income of a person within the charge to United Kingdom tax in respect of that income;
“ United Kingdom tax ” means income tax or corporation tax;

and paragraph 12D(3) (persons “related” to C) applies for the purposes of this paragraph as it applies for the purposes of paragraph 12D(2)(f).

(8) In the case of a company which is within the charge to United Kingdom tax only because it carries on a trade in the United Kingdom through a permanent establishment there, for the purposes of sub-paragraph (7)—

(a) the gross income derived from that company is so much of the gross income as is attributable to that establishment, and

(b) the income received by that company is such of its income as is attributable to that establishment.

Finance income and relevant IP income

12F (1) The requirement of this paragraph is that not more than 5% of C's gross income for the accounting period falls within sub-paragraph (2).

(2) Gross income falls within this sub-paragraph to the extent that it is—

(a) finance income, or

(b) relevant IP income.

(3) “ Finance income ” means—

(a) any amount which in accordance with UK generally accepted accounting practice falls to be recognised as arising from a financial asset, and

(b) any return, in relation to an amount, which—

(i) is produced for C by an arrangement to which C is party, and

(ii) is economically equivalent to interest,

except to the extent that the return is taken into account in determining an amount within paragraph (a).

(4) “ Relevant IP income ” means royalties and receipts of a similar nature arising from intellectual property.

(5) For the purposes of sub-paragraph (3)(b), the amount of a return is the amount which by virtue of the return would, in calculating C's chargeable profits, be treated under section 486B of CTA 2009 (disguised interest to be regarded as profit from loan relationship) as a profit arising to C from a loan relationship.

(6) But, in calculating that profit for the purposes of sub-paragraph (5), sections 486B(7) and 486C to 486E of CTA 2009 are to be ignored.

(7) In this paragraph—

“ economically equivalent to interest ” is to be construed in accordance with section 486B(2) and (3) of CTA 2009;
“ financial asset ” means a financial asset as defined for the purposes of UK generally accepted accounting practice or international accounting standards;
“ intellectual property ” is to be construed in accordance with paragraph 9(1A).

Gross income

12G (1) References in this Part of this Schedule to C's gross income are to be construed in accordance with this paragraph.

(2) C's gross income for an accounting period does not include—

(a) any distribution that would not be included in C's chargeable profits by reason of it being exempt for the purposes of Part 9A of CTA 2009 (see section 931A of that Act), or

(b) any amount that would be taken into account in computing chargeable gains if C were within the charge to corporation tax.

(3) C's gross income for an accounting period includes—

(a) any income which accrues during that period to the trustees of a settlement in relation to which C is a settlor or a beneficiary, and

(b) any income which accrues during that period to a partnership of which C is a partner, apportioned between C and the other partners on a just and reasonable basis.

(4) Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (3)(a), the income is to be apportioned between C and the other settlors or beneficiaries on a just and reasonable basis.

(5) In this paragraph—

“ distribution ” has the same meaning as in the Corporation Tax Acts (see Part 23 of CTA 2010);
“ partnership ” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.

Part 2B Companies Exploiting Intellectual Property with Limited UK Connection

Introductory

12H (1) For the purposes of section 748(1)(bb), a company (“C”) is exempt for an accounting period if the requirements of this Part of this Schedule are satisfied.

(2) The requirements are those imposed as to C's—

(a) business establishment (see paragraph 12I),

(b) intellectual property business (see paragraph 12J),

(d) UK connection (see paragraph 12L), and

(e) finance income (see paragraph 12M).

Business establishment

12I (1) The requirement of this paragraph is that throughout the accounting period C has a business establishment in the territory in which it is resident.

(2) For the purposes of sub-paragraph (1)—

(a) paragraph 5(2) to (5) (special rules about residence of the company) applies as it applies for the purposes of Part 2 of this Schedule, and

(b) paragraph 7 (meaning of “business establishment”) applies as it applies for the purposes of paragraph 6(1)(a).

Intellectual property business

12J (1) The requirement of this paragraph is that C's main business, throughout the accounting period, consists of the exploitation of intellectual property which does not have a relevant UK connection.

(2) For the purposes of sub-paragraph (1), if any part of C's main business consists of the exploitation of intellectual property which has a relevant UK connection, that part is to be ignored if it is an insignificant part of C's main business.

(3) Intellectual property has a relevant UK connection if—

(a) at any time during the accounting period or the 6 years immediately preceding that period, it has been held by a person resident in the United Kingdom, or

(b) activities relating to the creation, maintenance or enhancement of the intellectual property (other than activities of an incidental or insignificant nature) have been carried on by a person who for some or all of the period—

(i) beginning when the activities were first carried on by the person, and

(ii) ending at the end of the accounting period,

was related to C and within the charge to United Kingdom tax.

Other business activities

12K (1) The requirement of this paragraph is that—

(a) C does not, at any time during the accounting period, carry on any activities otherwise than in the course of its main business, or

(b) if it carries on any such activities (“secondary activities”), the secondary activities condition is met.

(2) The secondary activities condition is that either—

(a) the secondary activities do not, at any time during the accounting period, constitute a substantial part of the activities of C's business taken as a whole, or

(b) section 748(1)(b) or (ba) would apply to prevent an apportionment under section 747(3) falling to be made as regards that period, if C's business consisted only of the secondary activities carried on by it during the accounting period.

UK connection

12L (1) The requirement of this paragraph is that C does not have a significant connection with the United Kingdom during the accounting period.

(2) C has a significant connection with the United Kingdom during the accounting period if—

(a) all or a substantial proportion of C's gross income for that period consists of income from the exploitation of intellectual property which derives from persons within the charge to United Kingdom tax, or

(b) during that period C incurs expenditure (other than expenditure of an incidental or insignificant nature) on—

(i) R&D sub-contractor payments, or

(ii) the creation, development or maintenance of relevant intellectual property,

and that expenditure forms part of the income of a person who for some or all of that period is related to C and within the charge to United Kingdom tax.

(3) In this paragraph—

“ R&D sub-contractor payment ” means a payment made by C to another person in respect of research and development contracted out by C to that person;
“ relevant intellectual property ” means intellectual property which does not have a relevant UK connection (see paragraph 12J(3)) and which C exploits in the course of its main business.

Finance income

12M The requirement of this paragraph is that not more than 5% of C's gross income for the accounting period consists of finance income (within the meaning of paragraph 12F(3)).

Interpretation of Part 2B

12N (1) For the purpose of this Part of this Schedule—

“ intellectual property ” is to be construed in accordance with paragraph 9(1A);
“ United Kingdom tax ” means corporation tax or income tax;

and paragraph 12G (meaning of “gross income”) applies as it applies for the purposes of Part 2A of this Schedule.

(2) For the purposes of this Part of this Schedule a person is “related” to C at a particular time if at that time—

(a) the person is connected or associated with C,

(b) the person has a 25 per cent assessable interest in C in the case of the accounting period of C in which that time falls (within the meaning of paragraph 6(4C)), or

(c) if C is a controlled foreign company in the accounting period in which that time falls by virtue of subsection (1A) of section 747, the person is connected or associated with either or both of the two persons mentioned in that subsection.

(3) In the case of a company which is within the charge to United Kingdom tax only because it carries on a trade in the United Kingdom through a permanent establishment there—

(a) for the purposes of paragraph 12J(3)(b), the activities carried on by the company are such of the activities as are carried on through that establishment,

(b) for the purposes of paragraph 12L(2)(a), the income derived from that company is such of the income so derived as is attributable to that establishment, and

(c) for the purposes of paragraph 12L(2)(b), the income of that company is such of its income as is attributable to that establishment.

PART III THE PUBLIC QUOTATION CONDITION

Part 3A Exempt Periods

Introductory

15A The provisions of this Part of this Schedule have effect for the purposes of section 748(1)(f).

Beginning of exempt period

15B (1) An exempt period begins in relation to a company (“X”) at a time (“ the relevant time ”) when—

(a) X is resident outside the United Kingdom,

(b) X is controlled by persons resident in the United Kingdom,

(d) the requirements of paragraph 15C or 15D are met.

(2) There is a “relevant UK corporate investor in X” at a particular time if, at that time, there is a company which—

(a) is resident in the United Kingdom, and

(b) would, on the assumptions set out in sub-paragraph (3), be a company to which an apportionment of X's chargeable profits for the relevant accounting period would fall to be made in circumstances where section 747(5) would not prevent tax being chargeable on the company under section 747(4).

(3) The assumptions are—

(a) X has chargeable profits for the relevant accounting period,

(b) an apportionment of those profits falls to be made under section 747(3) for that period, and

(4) “ The relevant accounting period ” means the accounting period of X in which the time mentioned in sub-paragraph (2) falls.

15C (1) The requirements of this paragraph are that—

(a) no company was, at any time before the relevant time, a relevant UK corporate investor in X,

(b) no asset owned by X, or part of the business carried on by X, at the relevant time was previously owned, or carried on, by a company which—

(i) was under the control of persons resident in the United Kingdom at any time it owned the asset or carried on the part of the business, and

(ii) is or has been related to X,

(d) no disqualifying relevant transaction occurs (see paragraph 15E).

(2) Condition A is that, immediately before the relevant time, X—

(a) was in existence, but

(b) was not a member of the same group of companies as any person who, at the relevant time, was a controlling UK person.

(3) Condition B is that—

(a) at the relevant time X is controlled by a company which is resident in the United Kingdom, and

(b) immediately before that time, X was controlled by that same company but that company was not then resident in the United Kingdom.

(4) Condition C is that—

(a) at the relevant time—

(i) X is controlled by a company which is resident in the United Kingdom (“the intermediate parent”), and

(ii) the intermediate parent is controlled by a company which is not resident in the United Kingdom (“the parent”), and

(b) immediately before that time X was controlled by the parent but not the intermediate parent.

(5) Condition D is that X—

(a) is a controlled foreign company at the time it is formed, and

(b) is formed by one or more persons for the purpose of controlling one or more companies in circumstances where it is expected that an exempt period will begin in relation to one or more of those companies at the time when X begins to control the company or companies.

(6) In this paragraph “ controlling UK person ” means a person resident in the United Kingdom who alone, or together with other such persons, controls X.

15D (1) The requirements of this paragraph are that—

(a) the relevant time falls after 23 March 2011,

(b) X has an accounting period during which 23 March 2011 falls,

(d) no company was, immediately before the relevant time, a relevant UK corporate investor in X,

(e) at the relevant time X is controlled by a company which—

(i) is resident in the United Kingdom, and

(ii) is not under the control of another body corporate, or two or more other bodies corporate taken together, and

(f) no disqualifying relevant transaction occurs (see paragraph 15E).

(2) In determining for the purposes of sub-paragraph (1)(e)(ii) whether a company is under the control of two or more bodies corporate taken together, a body corporate which holds less than 10% of the issued ordinary shares of that company is to be disregarded.

(3) For the purposes of sub-paragraph (2), a body corporate is treated as holding any shares held by persons who are connected or associated with the body corporate.

Disqualifying relevant transactions

15E (1) This paragraph applies for the purposes of paragraph 15C and 15D.

(2) A disqualifying relevant transaction occurs if—

(a) a relevant transaction occurs at the relevant time (whether or not the transaction occurs pursuant to an agreement entered into by X before that time), or

(b) a relevant transaction occurs on or after 9 December 2010 but before the relevant time and that transaction forms part of an avoidance scheme.

(3) “ Relevant transaction ” means—

(a) the making by X of a loan or advance of an amount (other than a negligible amount) to a person who, at the time it is made, is related to X and subject to United Kingdom tax,

(b) an increase (other than an increase of a negligible amount) in the amount of an existing loan or advance made by X to a person who, at the time of the increase, is related to X and subject to United Kingdom tax,

(i) the loan or advance is to a person who, at the time the change is made, is related to X and subject to United Kingdom tax, and

(ii) the change has an effect (other than a negligible effect) on the amount of interest payable, or

(d) a transaction to which sub-paragraph (4) applies.

(4) This sub-paragraph applies to a transaction if—

(a) it is referable to an activity carried on by X as part, or the whole, of any non-exempt activities carried on by X,

(b) the results of the transaction are reflected in the profits arising in an accounting period of X and are not negligible in value, and

(c) the results of the transaction alone, or together with the results of one or more other transactions, achieves a reduction in United Kingdom tax.

(5) A transaction achieves, or two or more transactions together achieve, a reduction in United Kingdom tax if, had the transaction or transactions not been effected, any person—

(a) would have been liable for any such tax or for a greater amount of any such tax, or

(b) would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax.

(6) In this paragraph—

“ avoidance scheme ” means a scheme the main purpose, or one of the main purposes, of any party to which in entering into the scheme is to secure that section 748(1)(f) prevents an apportionment falling to be made under section 747(3) as regards an accounting period, or accounting periods, of X;
“ non-exempt activities ” has the meaning given by paragraph 12D(2);
“ scheme ” means any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving one or more transactions;
“ United Kingdom tax ” means corporation tax (or any tax chargeable as if it were corporation tax) or income tax.

Ending of exempt period

15F (1) An exempt period ends on the expiry of the period of 24 months which begins immediately after the first accounting period of X to end after the relevant time, unless sub-paragraph (2) applies.

(2) If an early termination event occurs after the relevant time but before the time the exempt period would end under sub-paragraph (1), the exempt period ends immediately before that event.

(3) An early termination event occurs if and when—

(a) a relevant transaction occurs, whether or not the transaction occurs pursuant to an agreement entered into by X before that time, or

(b) where the exempt period began because Condition D was met, X's business does not consist wholly in the holding of shares of companies which X controls, together with activities incidental to the holding of such shares.

Interpretation of Part 3A

15G (1) In this Part of this Schedule—

“ group ” means a company and any other companies it controls;
“ the relevant time ” has the meaning given by paragraph 15B;
“ relevant transaction ” has the meaning given by paragraph 15E;
“ relevant UK corporate investor in X ” has the meaning given by paragraph 15B(2);
“ X ” is to be construed in accordance with paragraph 15B.

(2) For the purposes of this Part of this Schedule a person is “related” to X at a particular time if—

(a) the person is connected or associated with X at that time,

(b) the person has a 25 per cent assessable interest in X in the case of the accounting period in which that time falls (within the meaning of paragraph 6(4C)), or

(c) if X is a controlled foreign company in the accounting period in which that time falls by virtue of subsection (1A) of section 747, the person is connected or associated with either or both of the two persons mentioned in that subsection.

PART IV REDUCTIONS IN UNITED KINGDOM TAX AND DIVERSION OF PROFITS

16 (1) The provisions of this Part of this Schedule have effect for the purposes of section 748(3).

(2) Any reference in paragraphs 17 and 18 below to a transaction—

(a) is a reference to a transaction the results of which are reflected in the profits arising in an accounting period of a controlled foreign company; and

(b) includes a reference to two or more transactions taken together, the results of at least one of which are so reflected .

17 (1) A transaction achieves a reduction in United Kingdom tax if, had the transaction not been effected, any person—

(a) would have been liable for any such tax or for a greater amount of any such tax; or

(b) would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax.

(2) In this Part of this Schedule and section 748(3) “ United Kingdom tax ” means income tax, corporation tax or capital gains tax.

18 It is the main purpose or one of the main purposes of a transaction to achieve a reduction in United Kingdom tax if this is the purpose or one of the main purposes—

(a) of the controlled foreign company concerned; or

(b) of a person who has an interest in that company at any time during the accounting period concerned.

19 (1) The existence of a controlled foreign company achieves a reduction in United Kingdom tax by a diversion of profits from the United Kingdom in an accounting period if it is reasonable to suppose that, had neither the company nor any company related to it been in existence—

(a) the whole or a substantial part of the receipts which are reflected in the controlled foreign company’s profits in that accounting period would have been received by a company or individual resident in the United Kingdom; and

(b) that company or individual or any other person resident in the United Kingdom either—

(i) would have been liable for any United Kingdom tax or for a greater amount of any such tax; or

(ii) would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax.

(2) For the purposes of sub-paragraph (1) above, a company is related to a controlled foreign company if—

(a) it is resident outside the United Kingdom; and

(b) it is connected or associated with the controlled foreign company; and

(c) in relation to any company or companies resident in the United Kingdom, it fulfils or could fulfil, directly or indirectly, substantially the same functions as the controlled foreign company.

(3) Any reference in sub-paragraph (1) above to a company resident in the United Kingdom includes a reference to such a company which, if the controlled foreign company in question were not in existence, it is reasonable to suppose would have been established.

Section 754(5).

SCHEDULE 26 RELIEFS AGAINST LIABILITY FOR TAX IN RESPECT OF CHARGEABLE PROFITS

Trading losses and group relief etc.

1 (1) In any case where—

(a) an amount of chargeable profits is apportioned to a company resident in the United Kingdom, and

(b) the company is entitled, or would on the making of a claim be entitled, in computing its profits for the appropriate accounting period, to a deduction in respect of any relevant allowance, . . .

then, on the making of a claim, a sum equal to corporation tax at the appropriate rate on so much of the relevant allowance . . . as is specified in the claim shall be set off against the company’s liability to tax under section 747(4)(a) in respect of the chargeable profits apportioned to it.

(2) In this paragraph—

(a) “ the appropriate accounting period ” means the accounting period for which, by virtue of section 754(2), the company is chargeable to tax by virtue of this Chapter in respect of the chargeable profits concerned; and

(b) “ the appropriate rate ” means the rate of corporation tax applicable to profits of the appropriate accounting period or, if there is more than one such rate, the average rate over the whole accounting period.

(3) In this paragraph “ relevant allowance ” means—

(a) any loss to which section 37 or 62(1) to (3) of CTA 2010 applies;

(b) any qualifying charitable donation ;

(cc) any expenses deduction under section 76(1);

(d) so much of any allowance to which section 74 of the 1968 Act applies as falls within subsection (3) of that section; . . .

(e) any amount available to the company by way of group relief; and

(f) any non-trading deficit on its loan relationships.

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

(5) Where, by virtue of sub-paragraph (1) above, a sum is set off against a liability to tax, so much of the relevant allowance as gives rise to the amount set off shall be regarded for the purposes of the Tax Acts as having been allowed as a deduction against the company’s profits in accordance with the appropriate provisions of those Acts.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Advance corporation tax

2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gains on disposal of shares in controlled foreign companies

3 (1) This paragraph applies in any case where—

(a) an accounting period of a controlled foreign company (“ the apportionment period ”) is one in respect of which an apportionment under section 747(3) falls to be made; and

(b) the company’s chargeable profits for the apportionment period have been apportioned among the persons in subsection (3) of that section; and

(i) shares in the controlled foreign company, or

(ii) shares in another company which, in whole or in part, give rise to the claimant company’s interest in the controlled foreign company,

being, in either case, shares acquired before the end of the apportionment period ; and

(d) by virtue of the apportionment referred to in paragraph (b) above, a sum is, under section 747(4)(a), chargeable on the claimant company as if it were an amount of corporation tax; and

(e) the claimant company makes a claim for relief under this paragraph;

and in this paragraph the disposal mentioned in paragraph (c) above is referred to as “ the relevant disposal ”.

(2) Subject to the following provisions of this paragraph, in the computation under Chapter III of Part II of the 1992 Act of the gain accruing on the relevant disposal, the appropriate fraction of the sum referred to in sub-paragraph (1)(d) above shall be allowable as a deduction; but to the extent that any sum has been allowed as a deduction under this sub-paragraph it shall not again be allowed as a deduction on any claim under this paragraph (whether made by the claimant company or another company).

(3) In relation to the relevant disposal, the appropriate fraction is—

where—

A is the average market value in the apportionment period of the shares disposed of, and
B is the average market value in that period of the interest in the controlled foreign company which, in the case of the claimant company, was taken into account in the apportionment referred to in sub-paragraph (1)(b) above.

(4) Where, before the relevant disposal—

(a) a dividend is paid by the controlled foreign company, and

(b) the profits out of which the dividend is paid are those from which the chargeable profits referred to in sub-paragraph (1)(b) above are derived, and

this paragraph does not apply in relation to a sum chargeable under section 747(4)(a) in respect of so much of the chargeable profits as corresponds to the profits which the dividend represents.

(5) The conditions referred to in sub-paragraph (4) above are—

(a) that the effect of the payment of the dividend is such that the value of the shares disposed of by the relevant disposal is less after the payment than it was before it; and

(b) that, in respect of a dividend paid or payable on the shares disposed of by the relevant disposal, the claimant company is, by virtue of paragraph 4(2) below, entitled under Part 2 of TIOPA 2010 to relief (by way of underlying tax) by reference to sums which include the sum referred to in sub-paragraph (1)(d) above.

(6) A claim for relief under this paragraph shall be made before the expiry of the period of three months beginning—

(a) at the end of the accounting period in which the relevant disposal occurs; or

(b) if it is later, on the date on which the assessment to tax for which the claimant company is liable by virtue of section 747(4)(a) becomes final and conclusive.

(6A) Nothing in—

(a) paragraph 10 of Schedule 18 to the Finance Act 1998 (claims or elections in company tax returns), or

(b) Schedule 1A to the Management Act (claims or elections not included in returns),

shall apply, whether by virtue of section 754 or otherwise, to a claim under sub-paragraph (6) above.

(7) In identifying for the purposes of this paragraph shares in a company with shares of the same class which are disposed of by the relevant disposal, shares acquired at an earlier time shall be deemed to be disposed of before shares acquired at a later time.

Dividends from the controlled foreign company

4 (1) This paragraph applies in any case where—

(a) an accounting period of a controlled foreign company is one in respect of which an apportionment under subsection (3) of section 747 falls to be made; and

(b) the company’s chargeable profits for that period have been apportioned among the persons referred to in that subsection , and

(c) the controlled foreign company pays a dividend in whole or in part out of the total profits from which (in accordance with subsection (6)(a) of that section) those chargeable profits are derived.

(2) Subject to paragraphs 5 and 6 below, where this paragraph applies, the aggregate of the sums chargeable on companies resident in the United Kingdom in accordance with section 747(4)(a) in respect of the chargeable profits referred to in sub-paragraph (1)(b) above shall be treated for the purposes of Part 2 of TIOPA 2010 (double taxation relief) as if it were an amount of tax paid in respect of the profits concerned under the law of the territory in which the controlled foreign company was resident and, accordingly, as underlying tax for the purposes of Chapter II of that Part.

(3) In the following provisions of this paragraph and in paragraphs 5 and 6 below, the aggregate of the sums which, under sub-paragraph (2) above, fall to be treated as underlying tax is referred to as the “ gross attributed tax ”.

(4) If, in the case of a person who receives the dividend, section 36, 40, 41 or 42 of TIOPA 2010 has the effect of reducing the amount which (apart from that section) would have been the amount of the credit for foreign tax which is to be allowed to that person, then, for the purposes of sub-paragraph (5) below, the amount of that reduction shall be determined and so much of it as does not exceed the amount of the foreign tax, exclusive of underlying tax, for which credit is to be allowed in respect of the dividend is in that sub-paragraph referred to as “ the wasted relief ”.

(5) Except for the purpose of determining the amount of the wasted relief, the gross attributed tax shall be treated as reduced by the aggregate of the wasted relief arising in the case of all the persons falling within sub-paragraph (4) above and, on the making of a claim by any of the companies referred to in sub-paragraph (2) above—

(a) the amount of tax chargeable on the company in accordance with section 747(4)(a) in respect of the chargeable profits referred to in sub-paragraph (1) (b) above shall, where appropriate, be reduced; and

(b) all such adjustments (whether by repayment of tax or otherwise) shall be made as are appropriate to give effect to any reduction under paragraph (a) above.

5 (1) In so far as any provision of—

(a) arrangements which have effect under section 2(1) of TIOPA 2010 (double taxation relief by agreement with territories outside the United Kingdom), or

(b) unilateral relief arrangements for a territory outside the United Kingdom (as defined by section 8 of that Act),

makes relief which is related to foreign dividends received by a company resident in the United Kingdom conditional upon that company either having a particular degree of control of the company paying the dividend or being a subsidiary of another company which has that degree of control, that condition shall be treated as fulfilled in considering whether any such company is by virtue of paragraph 4(2) above entitled to relief under Part 2 of TIOPA 2010 in respect of any of the gross attributed tax.

(2) Notwithstanding anything in paragraph 4(2) above, in section 31(2)(b) and (3) of TIOPA 2010 the expression “ underlying tax ” does not include gross attributed tax.

(3) In a case where the controlled foreign company pays a dividend otherwise than out of specified profits and, on the apportionment referred to in paragraph 4(1) above, less than the whole of the chargeable profits of the controlled foreign company concerned is apportioned to companies which are resident in the United Kingdom and liable for tax thereon as mentioned in section 747(4)(a)—

(a) the gross attributed tax shall be regarded as attributable to a corresponding proportion of the profits in question, and in this sub-paragraph the profits making up that proportion are referred to as “ taxed profits ”;

(b) so much of the dividend as is received by, or by a successor in title of, any such company shall be regarded as paid primarily out of taxed profits; and

(c) so much of the dividend as is received by any other person shall be regarded as paid primarily out of profits which are not taxed profits.

(4) The reference in sub-paragraph (3)(b) above to a successor in title of a company resident in the United Kingdom is a reference to a person who is such a successor in respect of the whole or any part of that interest in the controlled foreign company by virtue of which an amount of its chargeable profits was apportioned to that company.

6 (1) In any case where—

(a) on a claim for relief under paragraph 3 above, the whole or any part of any sum has been allowed as a deduction on a disposal of shares in any company; and

(b) that sum forms part of the gross attributed tax in relation to a dividend paid by that company; and

(c) a person receiving the dividend in respect of the shares referred to in paragraph (a) above (“ the primary dividend ”) or any other relevant dividend is, by virtue of paragraph 4(2) above, entitled under Part 2 of TIOPA 2010 to relief (by way of underlying tax) by reference to the whole or any part of the gross attributed tax;

the amount which, apart from this paragraph, would be available by way of any such relief to the person referred to in paragraph (c) above shall be reduced or, as the case may be, extinguished by deducting therefrom the amount allowed by way of relief as mentioned in paragraph (a) above.

(2) For the purposes of sub-paragraph (1)(c) above, in relation to the primary dividend, another dividend is a relevant dividend if—

(a) it is a dividend in respect of shares in a company which is resident outside the United Kingdom; and

(b) it represents profits which, directly or indirectly, consist of or include the primary dividend.

SCHEDULE 27

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SCHEDULE 28

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Schedule 28A Change in ownership of company with investment business: deductions

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SCHEDULE 28AA Provision not at arm’s length

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SCHEDULE 28AB Section 804ZA: prescribed schemes and arrangements

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SCHEDULE 28B Venture Capital Trusts: Meaning of “qualifying holdings”

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s.844

SCHEDULE 29 CONSEQUENTIAL AMENDMENTS

THE CAPITAL ALLOWANCES ACTS

1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TAXES MANAGEMENT ACT 1970 c.9

3 The Taxes Management Act 1970 shall have effect subject to the amendments made by paragraphs 4 to 10 below.

4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In subsection (2) and (3) of that section for the words “this section” there shall be substituted the words “ subsection (1) above ” .

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

8 (1) In subsection (1) of section 55 (recovery of tax not postponed) the following paragraph shall be substituted for paragraph (g) —[ for text see Taxes Management Act 1970 (c. 9), s. 55(1)(g) ].

(2) The following subsection shall be inserted in that section after subsection (6)—[ for text see Taxes Management Act 1970 (c. 9), s. 55(6A) ].

9 The following Table shall be substituted for the Table in section 98—[ for text see Taxes Management Act 1970 (c. 9), s. 98 ].

10 (1) The Taxes Management Act 1970, as amended by the Finance (No.2) Act 1987, shall have effect, after the day appointed under section 95 of the 1987 Act for the purposes of the provision in question, subject to the following amendments.

(2) In section 11(8) for “286” there shall be substituted “ 419 ” .

(3) In section 30(2A) . . . for “87 of the Finance (No.2) Act 1987” there shall be substituted “ 826 of the principal Act ” .

(4) In section 87A—

(a) in subsection (1) for “243(4)” there shall be substituted “ 10 ” ;

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

(c) in subsection (4), in paragraph (a) for “85 of the Finance Act 1972” there shall be substituted “ 239 of the principal Act ” , and in paragraph (b) for “85” there shall be substituted “ 239 ” ; and

(d) in subsection (5) for the words from “subsection” to “1972” there shall be substituted “ section 252(5) of the principal Act ” .

(5) In section 89 for “87 of the Finance (No.2) Act 1987” there shall be substituted “ 826 of the principal Act ” .

(6) In section 91(2A) for “90 of the Finance (No.2) Act 1987” there shall be substituted “ 10 of the principal Act ” .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) In section 109—

(a) in subsection (3) for “286” and “(4)” there shall be substituted “ 419 ” and “ (3) ” ;

(b) in subsection (3A) for “(5)” and “286” (twice) there shall be substituted “ (4) ” and “ 419 ” .

THE FRIENDLY SOCIETIES ACT (NORTHERN IRELAND) 1970 c.31 (N.I.)

11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE FINANCE ACT 1973 c.51

12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FRIENDLY SOCIETIES ACT 1974 c.46

13 In section 7 of the Friendly Societies Act 1974 at the end of subsection (3) there shall be added the following—

“ but nothing in this subsection shall apply with respect to—

(a) policies issued in respect of insurances made on or after 19th March 1985; or

(b) policies issued in respect of insurances made before that date which are varied on or after that date. ”

14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CAPITAL GAINS TAX ACT 1979 c.14