Finance Act 1981

• (5) A company shall not be regarded as ceasing to comply with subsection (2) or (3) above if it does so by reason of being wound up or dissolved without winding up and—

• (a) it is shown that the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax ; and

• (b) the company's net assets, if any, are distributed to its members or dealt with as bona vacantia before the end of the relevant period or, in the case of a winding up, the end (if later) of three years from the commencement of the winding up.

• (6) Where the relevant period begins after the incorporation of the company the requirements of subsection (3) above must have been complied with since its incorporation ; but for the purposes of subsections (2) and (3) above any interval between the incorporation of the company and the time when it commenced business shall be disregarded.

• (7) The company's share capital must not at any time in the relevant period include—

• (a) share capital other than ordinary share capital or fixed-interest preference share capital;

• (b) classes of ordinary shares with different rights in respect of matters other than voting; or

• (c) issued shares that are not fully paid up.

• (8) Subject to section 65 below, the company must not at any time in the relevant period—

• (a) control (or together with any person connected with it control) another company or be under the control of another company (or of another company and any person connected with that other company); or

• (b) be a 51 per cent, subsidiary of another company or itself have a 51 per cent, subsidiary;

and no arrangements must be in existence at any time in that period by virtue of which the company could fall within paragraph (a) or (b) above.

New qualifying trades

56

• (1) A trade is a qualifying trade if it complies with the requirements of subsections (2) to (4) below and is a new trade if it complies with the other requirements of this section.

• (2) The trade must not at any time in the relevant period consist to any substantial extent of—

• (a) dealing in commodities, shares, securities, land or futures; or

• (b) dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution ; or

• (c) banking, insurance, money-lending, debt-factoring, hire purchase financing or other financial activities; or

• (d) leasing (including letting ships on charter or other assets on hire) or receiving royalties or licence fees ; or

• (e) providing legal or accountancy services ; or

• (f) providing services or facilities for any trade carried on by another person which consists to any substantial extent of activities within any of the foregoing paragraphs and in which a controlling interest is held by a person who also has a controlling interest in the trade carried on by the company.

• (3) For the purposes of paragraph (b) of subsection (2) above—

• (a) a trade of wholesale distribution is one in which the goods are offered for sale and sold to persons for resale by them or for processing and resale by them ;

• (b) a trade of retail distribution is one in which the goods are offered for sale and sold to members of the general public for their use or consumption ;

and in determining for the purposes of that paragraph whether a trade is an ordinary trade of wholesale or retail distribution regard shall be had to the extent to which it has the features mentioned in Schedule 11 to this Act, those in Part I being regarded as indications that the trade is such an ordinary trade and those in Part II being regarded as indications of the contrary.

• (4) The trade must from the time when it is commenced until the end of the relevant period be conducted on a commercial basis and with a view to the realisation of profits.

• (5) Subject to subsection (6) below, the trade must be a bona fide new venture.

• (6) A trade shall not be treated as not being a bona fide new venture by reason only that it was carried on as, or as part of, a trade by another person at any time in the five years before the issue of the shares in respect of which the relief is claimed.

• (7) Without prejudice to the generality of subsection (5) above, a trade carried on by a company is not a new venture if—

• (a) a person having a controlling interest in that trade at any time in the period of twelve months beginning with the date on which the company begins to carry it on has in that period (or has had in the period of twelve months ending with that da(e) a controlling interest in another trade—

• (i) which is being carried on at that date ; or

• (ii) which was being carried on more than five years before the issue of the shares in respect of which the relief is claimed ; and

• (b) the trade carried on by the company, or a substantial part of it—

• (i) is concerned with the same or similar types of property or parts thereof or provides the same or similar services or facilities as the other trade; or

• (ii) serves substantially the same or similar outlets, or markets as the other trade.

• (8) For the purposes of this section a person has a controlling interest in a trade—

• (a) in the case of a trade carried on by a company if—

• (i) he controls the company ; or

• (ii) the company is a close company for the purposes of the Corporation Tax Acts and he or an associate of his is a director of the company and the beneficial owner of, or able directly or through the medium of other companies or by any other indirect means to control, more than 30 per cent, of the ordinary share capital of the company ; or

• (iii) not less than half of the trade could in accordance with section 253(2) of the Taxes Act be regarded as belonging to him ;

• (b) in any other case, if he is entitled to not less than half of the assets used for, or the income arising from, the trade.

• (9) For the purposes of subsection (8) above there shall be attributed to any person any rights or powers of any other person who is an associate of his.

• (10) References in this section to a trade shall be construed without regard to so much of the definition of " trade" in section 526(5) of the Taxes Act as relates to adventures or concerns in the nature of trade; but the foregoing provisions do not affect the construction of references in subsections (2)(f) or (6) to (8) to a trade carried on by a person other than the company and those references shall be construed as including references to any business, profession or vocation.

Disposal of shares

57

• (1) Where an individual disposes of any shares before the end of the relevant period, then—

• (a) if the disposal is otherwise than by way of a bargain made at arm's length, he shall not be entitled to any relief in respect of those shares ; and

• (b) in any other case, the amount of relief to which he is entitled in respect of those shares shall be reduced by the amount or value of the consideration which he receives for them.

• (2) Where an individual holds ordinary shares in a company and the relief has been given in respect of some but not others, any disposal by him of ordinary shares in the company shall be treated for the purposes of this section as relating to those in respect of which the relief has been given rather than to others.

• (3) Where the relief has been given to an individual in respect ¢of shares in a company which have been issued to him at different times any disposal by him of the shares shall be treated for the purposes of this section as relating to those issued earlier rather than to those issued later.

• (4) Where shares in respect of which the relief was given have by virtue of any such allotment as is mentioned in section 77(2)(a) of the Capital Gains Tax Act 1979 (not being an allotment for payment) fallen to be treated under section 78 of that Act as the same asset as a new holding—

• (a) a disposal of the whole or part of the new holding shall be treated for the purposes of this section as a disposal of the whole or a corresponding part of those shares; and

• (b) the new holding shall be treated for the purposes of subsection (2) above as shares in respect of which the relief has been given.

Value received from company

58

• (1) Where an individual who subscribes for shares in a company has received or subsequently before the end of the relevant period receives any value from the company within the meaning of this section the amount of the relief to which he is entitled in respect of the shares shall be reduced by the value received.

• (2) For the purposes of this section an individual receives value from the company if the company—

• (a) repays, redeems or repurchases any of its share capital or securities which belong to the individual or makes any payment to him for giving up his right to any of the company's share capital or any security on its cancellation or extinguishment;

• (b) repays any debt owed to the individual other than a debt which was incurred by the company—

• (i) on or after the date on which he subscribed for the shares in respect of which the relief is claimed; and

• (ii) otherwise than in consideration of the extinguishment of a debt incurred before that date;

• (c) makes to the individual any payment for giving up his right to any debt (other than a debt in respect of a payment of the kind mentioned in section 54(3)(a) or (e) above or an ordinary trade debt) on its extinguishment ;

• (d) releases or waives any liability of the individual to the company or discharges, or undertakes to discharge, any liability of his to a third person ;

• (e) makes a loan or advance to the individual;

• (f) provides a benefit or facility for the individual;

• (g) transfers an asset to the individual for no consideration or for consideration less than its market value or acquires an asset from him for consideration exceeding its market value; or

• (h) makes to him any other payment except a payment of the kind mentioned in section 54(3)(a), (b), (c), (d) cu(e) above or a payment in discharge of an ordinary trade debt.

• (3) For the purposes of this section an individual also receives value from the company if he receives in respect of ordinary shares held by him any payment or asset in a winding up or in connection with a dissolution of the company, being a winding up or dissolution falling within section 55(5) above.

• (4) The value received by an individual is—

• (a) in a case within paragraph (a), (b) or (c) of subsection (2) above, the amount receivable by the individual or, if greater, the market value of the shares, securities or debt in question ;

• (b) in a case within paragraph (d) of that subsection, the amount of the liability ;

• (c) in a case within paragraph (e) of that subsection, the amount of the loan or advance ;

• (d) in a case within paragraph (f) of that subsection, the cost to the company of providing the benefit or facility less any consideration given for it by the individual;

• (e) in a case within paragraph (g) of that subsection, the difference between the market value of the asset and the consideration (if any) given for it;

• (f) in a case within paragraph (h) of that subsection, the amount of the payment; and

• (g) in a case within subsection (3) above, the amount of the payment or, as the case may be, the market value of the asset.

• (5) Where by virtue of this section any relief is withheld or withdrawn in the case of an individual to whom ordinary shares in a company have been issued at different times the relief shall be withheld or withdrawn in respect of shares issued earlier rather than in respect of shares issued later.

• (6) For the purposes of subsection (2)(d) above a company shall be treated as having released or waived a liability if the liability is not discharged within twelve months of the time when it ought to have been discharged.

• (7) For the purposes of subsection (2)(e) above there shall be treated as if it were a loan made by the company to the individual—

• (a) the amount of any debt (other than an ordinary trade debt) incurred by the individual to the company ; and

• (b) the amount of any debt due from the individual to a third person which has been assigned to the company.

• (8) In this section " an ordinary trade debt" means any debt for goods supplied in the ordinary course of a trade or business where the credit given does not exceed six months and is not longer than that normally given to the customers of the person carrying on the trade or business.

• (9) In this section—

• (a) any reference to a payment or transfer to an individual includes a reference to a payment or transfer made to him indirectly or to his order or for his benefit; and

• (b) any reference to an individual includes a reference to an associate of his and any reference to the company includes a reference to any person connected with the company.

Prevention of misuse

59

• (1) An individual is not entitled to relief in respect of any shares unless the shares are subscribed for and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

• (2) The relief to which an individual is entitled in respect of any shares in a company shall be reduced in accordance with subsection (3) below if at any time in the relevant period the company repays, redeems or repurchases any of its share capital which belongs to any member other than—

• (a) that individual; or

• (b) another individual whose relief is thereby reduced by virtue of section 58(2)(a) above,

or makes any payment to any such member for giving up his right to any of the company's share capital on its cancellation or extinguishment.

• (3) Where subsection (2) above applies the amount of relief to which an individual is entitled shall be reduced by the amount receivable by the member or, if greater, the nominal value of the share capital in question ; and where, apart from this subsection, two or more individuals would be entitled to relief the reduction shall be made in proportion to the amounts of relief to which they would, apart from this subsection, have been entitled.

• (4) Where at any time in the relevant period a member of a company receives or is entitled to receive any value from the company within the meaning of this subsection, then, for the purposes of the provisions of section 53(3) and (7) and section 54(4) above in their application to any subsequent time—

• (a) the amount of the company's issued ordinary share capital; and

• (b) the amount of the part of that capital which consists of the shares relevant to those provisions and the amount of the part consisting of the remainder,

shall each be treated as reduced in accordance with subsection (5) below.

• (5) The amount of each of the parts mentioned in subsection (4)(b) above shall be treated as equal to such proportion of that amount as the amount subscribed for that part less the relevant value bears to the amount subscribed ; and the amount of the issued share capital shall be treated as equal to the sum of the amounts treated under this subsection as the amount of those parts respectively.

• (6) In subsection (4)(b) above the reference to the part of the capital which consists of the shares relevant to the provisions there mentioned is a reference—

• (a) in relation to section 53(3), to the part consisting of shares in respect of which the relief has been given or is claimed;

• (b) in relation to section 53(7), to the part consisting of shares in respect of which the relief has been given ;

• (c) in relation to section 54(4), to the part consisting of shares which (within the meaning of that section) the individual directly or indirectly possesses or is entitled to acquire;

and in subsection (5) above " the relevant value ", in relation to each of the parts there mentioned, means the value received by the member or members entitled to the shares of which that part consists.

• (7) For the purposes of subsection (4) above a member of a company receives or is entitled to receive value from the company in any case in which an individual would receive value from the company by virtue of paragraph (d), (e), (f), (g) or (h) of subsection (2) of section 58 above (but treating as excepted from paragraph (h) all payments made for full consideration) and the value received shall be determined as for the purposes of that section.

• (8) For the purposes of subsection (7) above a person shall be treated as entitled to receive anything which he is entitled to receive at a future date or will at a future date be entitled to receive.

Husband and wife

60

• (1) In the case of any amount subscribed by a married woman for shares issued to her at a time—

• (a) when she is living with her husband ; and

• (b) which falls in a year of assessment for which his income includes (or, if there were any, would include) any of hers,

the deduction under section 52(2) above shall, subject to subsection (2) below, be made from his total income, and references in this Chapter to the relief to which an individual is entitled in respect of any shares shall be construed accordingly.

• (2) For the purposes of sections 38(2) and 39 of the Taxes Act (option for separate assessment) the relief shall be treated as a relief under Chapter II of Part I of that Act; and where—

• (a) an application under section 38(1) of the Taxes Act; or

• (b) an election under section 23 of the Finance Act 1971 (separate taxation of wife's earnings),

is in force for a year of assessment for which a deduction falls to be made under section 52(2) above in respect of an amount subscribed by the wife, section 39(1)(c) of the Taxes Act and paragraph 4 of Schedule 4 to the said Act of 1971 (allocation of reliefs between husband and wife) shall have effect as if references to relief under section 20 of the Taxes Act and to a payment made by the wife included references to relief under this Chapter and to a payment made by her as a subscription for shares.

• (3) For the purposes of subsection (7) of section 36 of the Finance Act 1976 (allocation of surplus deduction to other spouse in year of non-aggregation) the relief shall be treated as a deduction under a provision to which that subsection applies but, in the case of the wife, only as respects amounts subscribed by her for shares issued in the part of the year of assessment mentioned in that subsection.

• (4) The limits in section 53(1) and (2) above shall apply jointly to a husband and wife as respects amounts subscribed for shares issued at a time—

• (a) when they are married and living together; and

• (b) which falls in a year of assessment for which his income includes (or, if there were any, would include) any of hers;

but if the husband dies or they are divorced or cease to live together before the end of any such year those limits shall apply to the wife as respects amounts subscribed by her for shares issued in the remainder of the year as if it were a separate year of assessment.

• (5) Where any such application or election as is mentioned in subsection (2) above is in force for a year of assessment in which shares are issued for which amounts have been subscribed both by the husband and the wife, then, if section 53(2) above requires a restriction to be placed on the relief given on a claim or claims in respect of those amounts, the available relief shall be divided between the husband and the wife in proportion to the amounts which have been respectively subscribed by them for the shares to which the claim or claims relate and which would, apart from the restriction, be eligible for the relief.

• (6) Subsection (1) of section 57 above shall not apply to a disposal made by a married woman to her husband at a time when she is living with him or to a disposal made at such a time by him to her; but where shares issued to one of them have been transferred to the other by a transaction inter vivos—

• (a) that subsection shall apply on the disposal of the shares by the transferee to a third person ; and

• (b) if at any time the husband and wife are divorced or cease to live together and any of those shares have not been disposed of by the transferee before that time, any assessment for withdrawing relief in respect of those shares shall be made on the transferee.

• (7) Where a husband and wife are divorced or cease to live together, then, if any relief given in respect of shares for which either of them has subscribed and which were issued while they were married and living together falls to be withdrawn by virtue of a subsequent disposal of those shares by the person who subscribed for them, any assessment for withdrawing that relief shall be made on the person making the disposal and shall be made by reference to the reduction of tax flowing from the amount of the relief regardless of any allocation of that reduction under section 39(1) or (2) of the Taxes Act and of any allocation of the relief under section 36(7) of the Finance Act 1976.

Claims

61

• (1) A claim for the relief in respect of shares issued by a company in any year of assessment shall be made—

• (a) not earlier than the end of that year or, if later, the end of the period mentioned in section 52(3)(a) above ; and

• (b) not later than two years after the end of that year or, if that period ends after the end of that year, not later than two years after the end of that period.

• (2) Where in any year of assessment shares are issued by a company to two or more individuals each of whom has subscribed at least £500 for his shares—

• (a) claims in respect of those shares may be made jointly by all or any of them ; and

• (b) if they do not all make their claims jointly, a claim made by any of them shall not be allowed unless it is accompanied by a statement by each such individual not claiming jointly that he is aware of the making of the claim.

• (3) Where the relief given on a claim to any individual would by virtue of section 53(3) above require the withdrawal of the whole or part of any relief already given to another individual, the claim shall not be allowed unless it is accompanied by a statement by the other individual that he consents to the making of the claim.

• (4) A claim for relief in respect of shares in a company shall not be allowed unless it is accompanied by a statement by the company that the conditions for the relief, so far as applying to the company and the trade, are satisfied up to the date on which the claim is made.

• (5) Any statement under subsection (4) above shall contain such information as the Board may reasonably require, shall be in such form as the Board may direct and shall contain a declaration that it is correct to the best of the company's knowledge and belief; and if any such statement is made fraudulently or negligently the company shall be liable to a penalty not exceeding £250 or, in the case of fraud, £500.

• (6) No application shall be made under section 55(3) or (4) of the Taxes Management Act 1970 (application for postponement of payment of tax pending appeal) on the ground that the applicant is entitled to the relief unless a claim for the relief has been duly made by him.

• (7) For the purposes of section 86 of the said. Act of 1970 (interest on overdue tax) tax charged by an assessment—

• (a) shall be regarded as due and payable notwithstanding that relief from the tax (whether by discharge or repayment) is subsequently given on a claim for the relief; but

• (b) shall, unless paid earlier or due and payable later, be regarded as paid on the date of the making of the claim on which the relief is given;

and section 91 of that Act (effect on interest of reliefs) shall not apply in consequence of any discharge or repayment for giving effect to the relief.

Assessments for withdrawing relief. 63. Information

62

• (1) Where any relief has been given which is subsequently found not to have been due it shall be withdrawn by the making of an assessment to tax under Case VI of Schedule D for the year of assessment for which the relief was given.

• (2) Subject to the following provisions of this section, any assessment for withdrawing relief which is made by reason of an event occurring after the date of the claim may be made within six years after the end of the year of assessment in which that event occurs.

• (3) No assessment for withdrawing relief in respect of shares issued to any person shall be made by reason of any event occurring after his death.

• (4) Where a person has, by a disposal or disposals to which section 57(1)(a) above applies, disposed of all the ordinary shares issued to him by a company, no assessment for withdrawing relief in respect of any of those shares shall be made by reason of any subsequent event unless it occurs at a time when he is connected with the company within the meaning of section 54 above.

• (5) Subsection (2) above is without prejudice to section 36 of the Taxes Management Act 1970 (fraud and wilful default) and section 37 of that Act (neglect).

• (6) In its application to an assessment made by virtue of this section, section 86 of the said Act of 1970 (interest on overdue tax) shall have effect as if the reckonable date were—

• (a) in the case of relief withdrawn by virtue of section 53(7), 54, 55, 56 or 59(2) in consequence of any event after the grant of the relief, the date of that event;

• (b) in the case of relief withdrawn by virtue of section 57(1) in consequence of a disposal after the grant of the relief, the date of the disposal;

• (c) in the case of relief withdrawn by virtue of section 58 in consequence of a receipt of value after the grant of the relief, the date of the receipt;

• (d) in (the case of relief withdrawn by virtue of section 59(1), the date on which the relief was granted.

• (7) For the purposes of subsection (6) above the date on which the relief is granted is the date on which a repayment of tax for giving effect to the relief was made or, if there was no such repayment, the date on which the inspector issued a notice to the claimant showing the amount of tax payable after giving effect to the relief.

Information.

63

• (1) Where an event occurs by reason of which any relief given to an individual falls to be withdrawn by virtue of section 54, 57, 58 or 60(6) above the individual shall within sixty days of his coming to know of the event give a notice in writing to the inspector containing particulars of the event.

• (2) Where an event occurs by reason of which any relief in respect of any shares in a company falls to be withdrawn by virtue of section 53(7), 55, 56, 58 or 59 above—

• (a) the company; and

• (b) any person connected with the company who has knowledge of that matter,

shall within sixty days of the event or, in the case of a person within paragraph (b) above of his corning to know of it, give a notice in writing to the inspector containing particulars of the event or payment.

• (3) Where a company is notified by the inspector that relief has been given in respect of any shares issued by the company on a specified date, then, if any shares in the company (whether or not shares in respect of which relief has been given) are transferred at any time in the period of five years beginning with that date, the company shall within sixty days of—

• (a) coming to know of the transfer ; or

• (b) receiving the notification from the inspector,

whichever is the later, give a notice in writing to the inspector containing particulars of the transfer.

• (4) If the inspector has reason to believe that a person has not given a notice which he is required to give under subsection (1), (2) or (3) above in respect of any event, the inspector may by notice in writing require that person to furnish him within such time, not being less than sixty days, as may be specified in the notice with such information relating to the event as the inspector may reasonably require for the purposes of this Chapter.

• (5) Where the relief is claimed in respect of shares in a company and the inspector has reason to believe that it may not be due by reason of any such arrangement or scheme as is mentioned in section 54(9), 55(8) or 59(1) above, he may by notice in writing require any person concerned to furnish him within such time, not being less than sixty days, as may be specified in the notice with—

• (a) a declaration in writing stating whether or not, according to information which that person has or can reasonably obtain, any such arrangement or scheme exists or has existed;

• (b) such other information as the inspector may reasonably require for the purposes of the provision in question and as that person has or can reasonably obtain.

• (6) References in subsection (5) above to the person concerned are, in relation to section 54(9) and 59(1), the claimant and, in relation to section 55(8) and 59(1), the company and any person controlling the company.

• (7) Where relief has been given in respect of shares in a company—

• (a) any person who receives from the company any payment or asset which may constitute value received (by him or another) for the purposes of section 58 or 59(4) above; and

• (b) any person on whose behalf such a payment or asset is received,

shall, if so required by the inspector, state whether the payment or asset received by him or on his behalf is received on behalf of any person other than himself and, if so, the name and address of that person.

• (8) Where relief has been claimed in respect of shares in a company, any person who holds or has held shares in the company and any person on whose behalf any such shares are or were held shall, if so required by the inspector, state whether the shares which are or were held by him or on his behalf are or were held on behalf of any person other than himself and, if so, the name and address of that person.

• (9) No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a company that relief has been given or claimed in respect of a particular number or proportion of its shares.

Capital gains tax

64

• (1) The sums allowable as deductions from the consideration in the computation for the purposes of capital gains tax of the gain or loss accruing to an individual on the disposal of shares in respect of which any relief has been given and not withdrawn shall be reduced—

• (a) where paragraph (b) below does not apply, by an amount equal to one-half of the amount of the relief ;

• (b) where those sums exceed the consideration, by an amount equal to—

• (i) the whole amount of the relief ; or

• (ii) the excess,

whichever is the less ;

but the foregoing provisions of this subsection shall not apply to a disposal falling within section 44(1) of the Capital Gains Tax Act 1979 (disposals between husband and wife).

• (2) Section 65 of the said Act of 1979 (pooling of shares etc.) shall not apply to shares in respect of which any relief has been given and not withdrawn; and any question whether a disposal relates to such shares or to other shares shall for the purposes of capital gains tax be determined as for the purposes of section 57 above.

• (3) Where an individual holds ordinary shares in a company and the relief has been given in respect of some but not others, then, if there is within the meaning of section 77 of the said Act of 1979 a reorganisation affecting those shares, section 78 of that Act shall apply separately to the shares in respect of which the relief has been given and to the other shares (so that the shares of each kind are treated as a separate holding of original shares and identified with a separate new holding).

• (4) There shall be made all such adjustments of capital gains tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the relief being given or withdrawn.

Application to subsidiaries

65

• (1) A qualifying company may in the relevant period have one or more subsidiaries if—

• (a) the conditions in subsection (2) below are satisfied in respect of the subsidiary or each subsidiary and, except as provided in subsection (3) below, continue to be so satisfied until the end of the relevant period ; and

• (b) the subsidiary or each subsidiary was incorporated in the United Kingdom, did not commence business before the qualifying company did so and complies with the requirements of section 55(2) to (6) above.

• (2) The conditions referred to in subsection (1)(a) above are—

• (a) that the qualifying company possesses all the issued share capital of, and all the voting power in, the subsidiary; and

• (b) that no other person has control of the subsidiary within the meaning of section 534 of the Taxes Act; and

• (c) that no arrangements are in existence by virtue of which the conditions in paragraphs (a) and (b) above could cease to be satisfied.

• (3) The conditions referred to in subsection (1)(a) above shall not be regarded as ceasing to be satisfied by reason only of the subsidiary or the qualifying company being wound up or dissolved without winding up if—

• (a) it is shown that the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax ; and

• (b) the net assets, if any, of the subsidiary or, as the case may be, the qualifying company are distributed to its members or dealt with as bona vacantia before the end of the relevant period, or in the case of a winding up, the end (if later) of three years from the commencement of the winding up.

• (4) Where a qualifying company has one or more subsidiaries in the relevant period the foregoing provisions of this Chapter shall have effect subject to Schedule 12 to this Act.

Nominees and approved investment funds

66

• (1) Subject to the provisions of this section, shares subscribed for, issued to, held by or disposed of for an individual by a nominee shall be treated for the purposes of this Chapter as subscribed for, issued to, held by or disposed of by that individual.

• (2) Section 53(1) above shall not apply where the amount is subscribed as nominee for an individual by the person or persons having the management of an investment fund approved for the purposes of this section by the Board (" the managers of an approved fund ").

• (3) Any shares issued to the managers of an approved fund as nominee for an individual shall be treated for the purposes of section 53(4) above as shares in respect of which relief has been claimed (whether or not claimed in fact).

• (4) The managers of an approved fund may be treated for the purposes of section 53(5) and (6) above as the claimant in respect of shares issued to them as nominees for an individual.

• (5) Section 63(1) above shall apply to the managers of an approved fund as it would apply to an individual if relief had been given to him in respect of the shares held for him as nominee by the managers (whether or not given in fact).

Interpretation

67

• (1) In this Chapter—

• "associate " has the meaning given in subsection (3) of section 303 of the Taxes Act except that " relative " in that subsection shall not include a brother or sister ;

• " control ", except in section 54(7) and section 65(2)(b), shall be construed in accordance with section 302(2) to (6) of that Act;

• "director" shall be construed in accordance with section 303(5) of that Act;

• " fixed-rate preference share capital" means share capital consisting of shares which— are issued for consideration which is or includes new consideration; and do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities; and do not carry any right to dividends other than dividends which— are of a fixed amount or at a fixed rate per cent, of the nominal value of the shares, and represent no more than a reasonable commercial return on the new consideration received by the company in respect of the issue of the shares; and on repayment do not carry any rights to an amount exceeding that new consideration except in so far as those rights are reasonably comparable with those general for fixed dividend shares listed in the Official List of The Stock Exchange ;

• " market value " shall be construed in accordance with section 150 of the Capital Gains Tax Act 1979 ;

• " new consideration " has the same meaning as in Part )( of the Taxes Act;

• " ordinary shares " means shares forming part of a company's ordinary share capital;

• " the relevant period " has the meaning given in section 52(5) above;

• "the relief" or "relief" means relief under section 52 above and references to the amount of the relief shall be construed in accordance with subsection (2) of that section.

• (2) Section 533 of the Taxes Act (meaning of connected persons) applies for the purposes of the provisions of this Chapter other than section 54.

• (3) References in this Chapter to a disposal of shares include references to a disposal of an interest or right in or over the shares and an individual shall be treated for the purposes of this Chapter as disposing of any shares which he is treated by virtue of section 86(1) of the Capital Gains Tax Act 1979 as exchanging for other shares.

• (4) References in this Chapter to the reduction of any amount include references to its reduction to nil.

Chapter III — Benefits in Kind

Cars available for private use

68

Car fuel

69

• (1) After section 64 of the Finance Act 1976 there shall be inserted—

(64A) (1) Where in any year in the case of a person employed in director's or higher-paid employment fuel is provided by reason of his employment for a car which is made available as mentioned in section 64 above, he shall be treated for the purposes of the Income Tax Acts (and in particular section 204 of the Taxes Act (pay as you earn)) as being paid by his employer in that year an emolument of his employment of an amount equal to whatever is the cash equivalent of that benefit in that year. (2) Subject to the following provisions of this section, the cash equivalent of that benefit shall be ascertained from Table A below where the car has an internal combustion engine with one or more reciprocating pistons and from Table B below in the case of other cars; and for the purposes of Table A below a car's cylinder capacity is the capacity of its engine calculated as for the purposes of the Vehicles (Excise) Act 1971 or the Vehicles (Excise) Act (Northern Ireland) 1972.

Cylinder capacity of car in cubic centimetres	Cash equivalent
1300 or less	£270
More than 1300, but not more than 1800	£360
More than 1800	£540
Original market value of car	Cash equivalent
---	---
Less than £3,600	£270
£3,600 or more, but less than £5,100	£360
£5,100 or more	£540

(3) Without prejudice to the generality of subsection (1) above, fuel is provided for a car if— (a) any liability in respect of the provision of fuel for the car is discharged ; (b) a voucher within the meaning of section 36 of the Finance (No. 2) Act 1975 or a credit-token within the meaning of section 36A of that Act is used to obtain fuel for the car or money which is spent on such fuel; or (c) any sum is paid in respect of expenses incurred in providing fuel for the car. (4) The Treasury may by order taking effect from the beginning of any year beginning after it is made (but not of any year earlier than 1983-84) substitute a different Table for either of the Tables in subsection (2) above. Orders under this subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons. (5) Where paragraph 2 or 3 of Part II of Schedule 7 to this Act applies to reduce the cash equivalent of the benefit of the car for which the fuel is provided, the same reduction shall be made to the cash equivalent of the benefit of the fuel ascertained under subsection (2) above. (6) If in the relevant year— (a) the employee is required to make good to the person providing the fuel the whole of the expense incurred by him in or in connection with the provision of fuel for his private use and he does so ; or (b) the fuel is made available only for business travel, the cash equivalent is nil. (7) For the purposes of section 204 of the Taxes Act no alteration of the cash equivalent shall be made by virtue of sub-paragraph (1) of paragraph 2 of Part II of Schedule 7 to this Act in a case in which sub-paragraph (2) (b) of that paragraph applies or of paragraph 3 of that Part or of subsection (6)(a) above unless the inspector has notified the employer of the alteration to be made. (8) Subsections (6) and (7) of section 64 above shall apply in relation to the amount referred to in subsection (1) above as they apply to the amount referred to in subsection (1) of that section.

.

• (2) This section has effect for the year 1982-83 and subsequent years of assessment.

Transport vouchers

70

• (1) Section 36 of the Finance (No. 2) Act 1975 (benefits in kind: vouchers other than cash vouchers) shall be amended as follows.

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

(2A) The expense incurred as mentioned in subsection (1)(a) above by the person providing the voucher shall be treated as reduced by any part of that expense made good to that person by the employee.

.

• (3) At the end of subsection (4) (definition of "voucher") there shall be inserted the words " and includes a transport voucher. ".

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

(4A) In this section " transport voucher " means any ticket, other document or pass intended to enable a person in possession of it to obtain passenger transport services and, in relation to a transport voucher, references in this section to a voucher being exchanged for services shall be construed accordingly.

.

• (5) In subsection (5)—

• (a) for paragraph (a) there shall be substituted—

(a) " employee " means the holder of any office or employment the emoluments in respect of which fall to be assessed under Schedule E, and related expressions shall be construed accordingly

; and

• (b) in paragraph (d) the words "or family" shall be omitted and at the end there shall be inserted the words " or his parent or child or the spouse of his child or any dependant of the employee's ".

• (6) Subsection (2) of this section shall be deemed to have had effect since 6th April 1976 and the remaining provisions of this section have effect for the year 1982-83 and subsequent years of assessment but section 15 of the Taxes Management Act 1970 (returns of employees' emoluments etc.) shall have effect for the year 1981-82 as if all the amendments made by this section were in operation for that year.

Credit-tokens

71

• (1) After section 36 of the Finance (No. 2) Act 1975 there shall be inserted—

(36A) (1) Subject to the provisions of this section, where a credit-token is provided for an employee by reason of his employment, then, for the purposes of the Income Tax Acts— (a) if the person providing the credit-token incurs any expense in or in connection with its provision, the employee shall be treated as having received in the year of assessment in which the expense is incurred an emolument from his employment of an amount equal to that expense; (b) on each occasion that the employee uses the credit-token to obtain money, goods or services he shall be treated as having received an emolument from his employment of an amount equal to the expense incurred by the person providing the credit-token in or in connection with the provision of the money, goods or services obtained (including any interest paid in connection therewith); and (c) any money, goods or services obtained by the employee by use of the credit-token shall be disregarded. (2) There shall be deductible under section 189, 192 or 194(3) of the Taxes Act (necessary expenses etc.) from the amount taxable under subsection (1) above such amounts if any as would have been so deductible if the cost of the goods or services in question had been incurred by the employee out of his emoluments. (3) The expense incurred by the person providing the credit-token as mentioned in paragraphs (a) and (b) of subsection (1) above shall be treated as reduced by any part of that expense made good to that person by the employee. (4) In this section " credit-token " does not include a voucher within the meaning of section 36 or a cash voucher within the meaning of section 37 of this Act, but subject to that shall be construed in accordance with section 14 of the Consumer Credit Act 1974 with the substitution for the words " an individual " wherever they occur in that section of the words " a person ". (5) Subsection (5) of section 36 of this Act shall apply for the purpose of this section (the references to a voucher being for this purpose read as references to a credit-token). (6) If a person furnishes to the inspector a statement of the cases and circumstances in which credit-tokens are provided for any employees (whether his own or those of anyone else) and the inspector is satisfied that no additional tax is payable under this section by reference to the credit-tokens mentioned in the statement, the inspector shall notify the person accordingly and nothing in this section shall apply to the provision of those credit-tokens or their use. (7) The inspector may, if in his opinion there is reason to do so, by notice in writing served on the person to whom the notification under subsection (6) above was given, revoke the notification, either as from the date of its making or as from such later date as may be specified in the notice under this subsection; and all such income tax becomes chargeable, and all such returns are to be made by that person and by the employees in question, as would have been chargeable or would have had to be made in the first instance if the notification under subsection (6) above had never been given or, as the case may be, it had ceased to have effect on the specified date.

.

• (2) In section 15(7)(a) of the Taxes Management Act 1970 (returns of employees' emoluments) and in section 69(2)(a) of the Finance Act 1976 (amounts included as emoluments for purposes of director's or higher-paid employment) after " 36 " there shall be inserted " , 36A. "

• (3) This section has effect for the year 1982-83 and subsequent years of assessment.

Medical insurance and treatment

72

• (1) At the end of section 62 of the Finance Act 1976 (exceptions from general charge) there shall be inserted—

(8) Section 61 above does not apply where the benefit consists— (a) in providing the employee with medical treatment outside the United Kingdom (including providing for him to be an in-patient) in a case where the need for the treatment arises while the employee is outside the United Kingdom for the purpose of performing the duties of his employment; or (b) in providing insurance for the employee against the cost of such (treatment in such a case; and for the purpose of this subsection, medical treatment includes all forms of treatment for, and all procedures for diagnosing, any physical or mental ailment, infirmity, or defect.

.

• (2) Section 68 of that Act (medical insurance) shall cease to have effect.

• (3) In section 15(7)(a) of the Taxes Management Act 1970 and in section 61(2) of the said Act of 1976 for the words "to 68 " there shall be substituted the words " to 67 ".

• (4) This section has effect for the year 1982-83 and subsequent years of assessment.".

Chapter IV — Capital Allowances

Industrial buildings etc.: increase of initial allowances

73

Industrial buildings etc.: sales after cessation of use for qualifying purpose

74

• (1) Chapter I of Part I of the Capital Allowances Act 1968 (industrial buildings and structures etc.) shall have effect with the following amendments, being amendments with respect to the calculation of writing-down allowances and the making of balancing allowances and charges where a building or structure has ceased to be an industrial building or structure.

• (2) In section 2(3) of that Act (calculation of writing-down allowance where the relevant interest is sold while the building or structure is an industrial building or structure) for the words " while the building or structure is an industrial building or structure " there shall be substituted the words " and the sale is an event to which section 3(1) of this Act applies ".

• (3) In section 3(1) of that Act (balancing allowance or charge on occurrence of certain events while the building or structure is an industrial building or structure)—

• (a) after the words " while the building or structure is an industrial building or structure " there shall be inserted the words " or after it has ceased to be one ";

• (b) at the end of the proviso there shall be inserted the words " and where two or more events occur during a period when the building or structure is not an industrial building or structure no balancing allowance or balancing charge shall be made on the occurrence of any of those events except the first. ".

• (4) In section 6 of that Act (manner of making allowances and charges) after subsection (6) there shall be inserted—

(7) Where a balancing allowance or balancing charge falls to be made in the case of a building or structure which has ceased to be an industrial building or structure and the circumstances are such as are mentioned in paragraph (a) and (b) of subsection (2) of section 12 of this Act, the allowance or charge shall be made as provided in that subsection.

.

• (5) In section 38 of the Finance Act 1978 (application of the said Chapter I to qualifying hotels) and in section 74 of the Finance Act 1980 (application of that Chapter to commercial buildings and qualifying hotels in enterprise zones) references to that Chapter shall be construed as references to that Chapter as amended by this section.

• (6) This section has effect where the sale referred to in section 2(3) of the said Act of 1968 or, as the case may be, the event referred to in paragraph (a), (b), (c) or (d) of section 3(1) of that Act occurs after 17th December 1980 but not where the sale is pursuant to a contract of sale made on or before that date or the event is a sale pursuant to such a contract.

Industrial buildings etc.: balancing adjustments in cases of use for non-qualifying purpose

75

• (1) Chapter I Of Part I of the Capital Allowances Act 1968 (industrial buildings and structures etc.) shall have effect with the following amendments, being amendments with respect to the calculation of balancing allowances and charges where a building or structure has at any time been used otherwise than as an industrial building or structure or for scientific research.

• (2) For section 3(4) and (5) of that Act (calculation of balancing allowance and charge where no writing-down allowance has been made for part of the relevant period) there shall be substituted—

(4) If for any part of the relevant period the building or structure was neither an industrial building or structure nor used for scientific research, subsections (4A) to (5) below shall have effect instead of subsections (2) and (3) above. (4A) Subject to subsection (4C) below, where the sale, insurance, salvage or compensation moneys are not less than the capital expenditure, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the allowances given. (4B) Subject to subsection (4C) below, where there are no sale, insurance, salvage or compensation moneys or where those moneys are less than the capital expenditure, then— (a) if the adjusted net cost of the building or structure exceeds the allowances given, a balancing allowance shall be made and the amount thereof shall be an amount equal to the excess; (b) if the adjusted net cost of the building or structure is less than the allowances given, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the shortfall. (4C) No balancing charge or allowance shall be made under subsection (4A) or (4B) above on the occasion of a sale if by virtue of paragraph 4 of Schedule 7 to this Act the building or structure is treated as having been sold for a sum equal to the residue of the expenditure on its construction immediately before the sale. (5) In subsections (4) to (4B) above and in this subsection— - " the relevant period " means the period beginning at the time when the building or structure was first used for any purpose and ending with the event giving rise to the balancing allowance or balancing charge except that where there has been a sale of the building or structure after that time and before that event the relevant period shall begin on the day following that sale or, if there has been more than one such sale, the last such sale ; - " the capital expenditure " means— where paragraph (b) of this definition does not apply, the capital expenditure incurred (or by virtue of section 5 of this Act deemed to have been incurred) on the construction of the building or structure ; where the person to or on whom the balancing allowance or balancing charge falls to be made is not the person who incurred (or is deemed to have incurred) that expenditure, the residue of that expenditure at the beginning of the relevant period, together (in either case) with any amount to be added to the residue of that expenditure by virtue of section 4(11) of this Act; - " the allowances given " means the allowances referred to in subsection (6) of this section ; - " the adjusted net cost" means— where there are no sale, insurance, salvage or compensation moneys, the capital expenditure ; where those moneys are less than that expenditure, the amount by which they are less, reduced (in either case) in the proportion that the part, or the aggregate of the parts, of the relevant period for which the building or structure was an industrial building or structure or used for scientific research bears to the whole of that period ; - " scientific research " has the same meaning as in Part II of this Act

• (3) After section 4(10) of that Act there shall be inserted—

(10A) Where, on the occasion of a sale, a balancing charge is made under section 3(4B)(b) of this Act in respect of the expenditure and, apart from this subsection, the residue of the expenditure immediately after the sale would by virtue of subsection (10) above be deemed to be greater than the net proceeds of the sale, the residue immediately after the sale shall be deemed for the purposes of this Chapter to be equal to the net proceeds.

• (4) In section 38 of the Finance Act 1978 (application of the said Chapter I to qualifying hotels) and in section 74 of the Finance Act 1980 (application of that Chapter to commercial buildings and qualifying hotels in enterprise zones) references to that Chapter shall be construed as references to that Chapter as amended by this section.

• (5) This section has effect where the event referred to in paragraph (a), (b), (c) or (d) of section 3(1) of the said Act of 1968 occurs after 17th December 1980 but not where that event is a sale pursuant to a contract of sale made on or before that date.

Transfers other than sales and transactions between connected persons

76

• (1) For the purposes of Chapter I of Part I of the Capital Allowances Act 1968 (industrial buildings and structures etc.) and the other provisions of that Act which are relevant to that Chapter any transfer of the relevant interest in a building or structure otherwise than by way of sale shall be treated as a sale of the interest for a price other than that which it would have fetched if sold on the open market.

• (2) If Schedule 7 to the said Act of 1968 (special provisions as to certain sales) would not apart from this subsection have effect in relation to a transfer treated as a sale by virtue of subsection (1) above, that Schedule shall have effect in relation to it as if it were a sale falling within paragraph 1(1)(a) of that Schedule.

• (3) In section 78(1) of the said Act of 1968 and paragraph 1(1) of Schedule 7 to that Act—

• (a) in paragraph (a) after the words " both of them " there shall be inserted the words " or the buyer and the seller are connected with each other within the meaning of section 533 of the principal Act ";

• (b) in paragraph (b) after the words " the obtaining of an allowance or deduction " there shall be inserted the words " , the obtaining of a greater allowance or deduction or the avoidance or reduction of a charge ".

• (4) In section 38 of the Finance Act 1978 (application of the said Chapter I to qualifying hotels) and in section 74 of the Finance Act 1980 (application of that Chapter to commercial buildings and qualifying hotels in enterprise zones) references to that Chapter shall be construed as references to that Chapter as amended by this section.

• (5) This section has effect where the transfer or sale occurs after 10th March 1981 but not when the transfer or sale is pursuant to a contract for the carrying out of the transaction or sale made on or before that date.

Carry forward of unused allowances

77

• (1) Section 70 of the Capital Allowances Act 1968 (income tax allowances in taxing a trade etc.) shall be amended as follows.

• (2) In subsection (4) for the words following " as the case may be " there shall be substituted the words " shall be carried forward and, so far as may be, made as a deduction in charging the profits or gains of the trade in subsequent years of assessment. "

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

(4A) Where the allowances in respect of which deductions can be made under this section for any year include allowances carried forward under subsection (4) above from a previous year the allowances shall, subject to paragraph 5 of Schedule 9 to the Finance Act 1981, be deducted in the following order— (a) allowances other than those carried forward under subsection (4) above from an earlier year ; (b) allowances carried forward as aforesaid from years of assessment not earlier than the year for which the basis period ended on or included 14th November 1980; (c) allowances carried forward as aforesaid from years of assessment earlier than those referred to in paragraph (b) above.

• (4) This section has effect for the year of assessment for which the basis period ended on or included 14th November 1980 and for subsequent years of assessment.

Chapter V — Capital Gains

Extension of general relief for gifts

78

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

• (2) In subsection (3)(a) of section 79 of the Finance Act 1980 for the words “section 19(3)” there shall be substituted the words “ any provision ”.

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

• (4) This section applies to disposals after 5th april 1981.

Emigration of donee

79

Gains of non-resident settlements

80

Migrant settlements

81

Transfers between settlements

82

Provisions supplementary to sections 80 to 82

83

Power to obtain information for purposes of sections 80 to 82

84

Non-resident trustees and non-resident companies

85

Transfers into settlement

86

Appointments to persons under disability

87

Disposal of interests in non-resident settlements

88

Trusts for the disabled

89

Market value

90

Consideration on reorganisation of share capital etc.

91

Part V — Capital Transfer Tax

Reduction of lifetime rates

92

Ten-year cumulation period

93

• (1) In section 37(1)(b) of the Finance Act 1975 (rate of tax on second or subsequent transfer of value to be calculated by reference to the values previously transferred by chargeable transfers made by the same transferor) for the words " previously transferred by chargeable transfers made by that transferor " there shall be substituted the words " transferred by chargeable transfers made by that transferor in the period of ten years ending with the date of the transfer ".

• (2) In subsection (1)(b) of section 86 of the Finance Act 1976 (mutual transfers: exemption for donee's gift) for the word " subsequently " there shall be substituted the words " , within the period of ten years beginning with the date of the donor's transfer, ".

• (3) In subsection (1)(b) of section 87 of the Finance Act 1976 (mutual transfers: relief for donor's gift) after the words " any chargeable transfer made by the donor after the claim" there shall be inserted the words " and within the period of ten years beginning with the date of the donor's transfer ".

• (4) For subsections (2) and (3) of section 114 of the Finance Act 1976 (transfers reported la(e) there shall be substituted—

(2) Where the earlier transfer is made in the period of ten years ending with the date of the later transfer there shall be charged on the value transferred by the earlier transfer, in addition to any tax chargeable on it apart from this section, an amount of tax equal to the difference, if any, between— (a) the tax which, having regard to the earlier transfer, was properly chargeable on the value transferred by the later transfer; and (b) the payment accepted by the Board in full satisfaction of the tax chargeable on that value; and any such difference shall not be chargeable on the value transferred by the later transfer. (3) Where in the period mentioned in subsection (2) above there have been two or more earlier transfers the reference in paragraph (a) of that subsection to the earlier transfer shall be construed as a reference to both or all of those transfers, but the amount of tax chargeable under that subsection in respect of each of them shall, subject to subsection (3A) below, be reduced in the proportion which the value transferred by it bears to the aggregate of the values transferred by it and the other or others. (3A) Where the earlier transfers mentioned in subsection (3) above include a settled transfer, that is to say, a transfer in the case of which an amount in full satisfaction of the tax chargeable in respect of it under subsection (2) above has been paid to and accepted by the Board before the discovery of one or more of the other earlier transfers— (a) no further tax shall be chargeable under subsection (2) above in respect of the settled transfer in consequence of regard being had under paragraph (a) of that subsection to the subsequently discovered transfer or transfers; (b) the amount so paid and accepted shall reduce the amount chargeable under subsection (2) above in respect of the subsequently discovered transfer or transfers; and (c) if there are two or more subsequently discovered transfers, the value transferred by the settled transfer shall be disregarded in calculating under subsection (3) above the reduction in the amount of tax chargeable in respect of each of them. (3B) Where the later transfer referred to in subsection (2) above is itself an earlier transfer in relation to another later transfer the references in paragraphs (a) and (b) of that subsection to tax chargeable on the value transferred by it are references to tax so chargeable apart from this section.

.

• (5) At the end of subsection (6) of the said section 114 there shall be inserted the words " and subsection (2)(b) above shall apply in relation to any such transfer as if the amount of the payment were nil ".

Exemptions

94

• (1) In paragraph 2 of Schedule 6 to the Finance Act 1975 (annual exemption for transfers not exceeding £2,000) for " £2,000" wherever it occurs there shall be substituted " £3,000 ".

• (2) In paragraph 4(1) of that Schedule (exemption for small gifts) for the words " to the extent that" there shall be substituted the word " if ".

• (3) Subject to subsection (5) below, and notwithstanding the provisions of paragraph 8 of that Schedule, references to transfers of value in paragraphs 2 and 6 (exemption for gifts in consideration of marriage) of that Schedule shall be construed as including references to events on the happening of which tax is chargeable under paragraph 4 of Schedule 5 to the Finance Act 1975 (termination of interest in possession in settled property) ; and references to the transferor and (in paragraph 6(3)) to a disposition shall be construed accordingly.

• (4) For the purpose of its application, by virtue of subsection (3) above, to the termination of interests in possession in settled property, the said paragraph 6 shall have effect as if—

• (a) references to transfers of value made by gifts in consideration of marriage were references to the termination of such interests in consideration of marriage;

• (b) references to outright gifts were references to cases where the property ceases on the termination to be settled property; and

• (c) references to cases where the property is settled by the gift were references to cases where it remains settled property after the termination.

• (5) Subsection (3) above shall not apply to a transfer of value—

• (a) unless the transferor has in accordance with subsection (6) below given to the trustees of the settlement a notice informing them of the availability of an exemption, and

• (b) except to the extent specified in that notice.

• (6) A notice under subsection (5) above shall be in such form as may be prescribed by the Board and shall be given before the end of the period of six months beginning with the date of the transfer of value.

• (7) This section applies to any transfer of value made on or after 6th April 1981 ; but subsection (1) above does not affect the amount which under paragraph 2(2) of the said Schedule 6 may be carried forward to the year beginning on that date.

Interest-free instalments of tax

95

• (1) Paragraph 16(5) of Schedule 4 to the Finance Act 1975 (which imposes a limit of £250,000 on the value by reference to which tax may be paid by interest-free instalments) shall cease to have effect.

• (2) This section has effect in relation to chargeable transfers made on or after 10th March 1981.

Relief for agricultural property

96

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

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

• (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Grant of tenancies of agricultural property

97

Scottish agricultural leases: fixed terms

98

Where any part of the value of a person's estate immediately before his death is attributable to the interest of a tenant in an unexpired portion of a lease for a fixed term of agricultural property in Scotland and either he had been tenant of the said property continuously for a period of at least two years immediately preceding his death or he had become tenant of the said property by succession there shall be left out of account in determining the value transferred on the death any value associated with any prospect of renewal of the lease by tacit relocation.

Scottish agricultural leases: tacit relocation

99

• (1) Schedule 15 to this Act shall have effect for giving relief where the value transferred by a chargeable transfer made on death is determined by reference to the value of an agricultural tenancy in Scotland and the conditions mentioned in that Schedule are satisfied.

• (2) The Finance Act 1975 shall be amended as follows—

• (a) in section 26, after subsection (2), there shall be added the following subsection—

(2A) No person other than the person referred to in sub-paragraph (2) of paragraph 3 of Schedule 15 to the Finance Act 1981 shall be liable for any tax which is chargeable under that paragraph.

;

• (b) in Schedule 4, in paragraph 2(7), after " to this Act" there shall be inserted " or paragraph 3 of Schedule 15 to the Finance Act 1981 ; "

• (c) in Schedule 4, in paragraph 12(4), after " to this Act" there shall be inserted " or paragraph 3 of Schedule 15 to the Finance Act 1981 ";

• (d) in Schedule 4, in paragraph 19(1)(c), after " to this Act" there shall be inserted " or paragraph 3 of Schedule 15 to the Finance Act 1981 ".

• (3) Schedule 15 to the Finance Act 1980 shall be amended by inserting after paragraph 4 the following new paragraph—

(4A) Where the value of an interest in an agricultural tenancy has been left out of account under Schedule 15 to the Finance Act 1981 in determining the value transferred by the chargeable transfer made on a death before a reduction and tax is chargeable under paragraph 3 of that Schedule on a disposal of the said interest after that reduction (or after that and one or more subsequent reductions) the rate or rates mentioned in paragraph 4 of that Schedule shall be determined as if the first of the Tables in section 37(3) of the Finance Act 1975 as substituted by that reduction (or by the most recent of those reductions) had applied to that transfer.

.

Business property used by beneficiary under settlement

100

• (1) Schedule 10 to the Finance Act 1976 (relief for business property) shall have effect with the following amendments in relation to transfers of value, distribution payments and capital distributions made on or after 10th March 1981.

• (2) In paragraph 2(1A)(c) (cases attracting relief at 30 per cent.) after the words " paragraph 3(1)(c) " there shall be inserted " or (d) ".

• (3) In paragraph 3(1) (which describes the property eligible for relief) after paragraph (c) there shall be added

and (d) any land or building, machinery or plant which, immediately before the transfer, was used wholly or mainly for the purposes of a business carried on by the transferor and was settled property in which he was then beneficially entitled to an interest in possession

.

• (4) In paragraph 3(6)—

• (a) after the words " sub-paragraph (1)(c)" there shall be inserted " or (d) "; and

• (b) for the words from " transferor's interest" to " may be " there shall be substituted the words " business or the transferor's interest in it is, or ".

Relief for successive charges

101

• (1) Where the value of a person's estate was increased by a chargeable transfer ("the first transfer") made not more than five years before—

• (a) his death, or

• (b) a chargeable transfer which is made by him otherwise than on his death and as to which the conditions specified in subsection (2) below are satisfied,

the tax chargeable on the value transferred by the transfer made on his death or, as the case may be, referred to in paragraph (b) above (" the later transfer ") shall be reduced by an amount calculated in accordance with subsection (3) below.

• (2) The conditions referred to in subsection (1)(b) above are—

• (a) that the value transferred by the later transfer falls to be determined by reference to the value of settled property in which there subsists an interest in possession to which the transferor is entitled ;

• (b) that the value transferred by the first transfer also fell to be determined by reference to the value of that property; and

• (c) that the first transfer either was or included the making of the settlement or was made after the making of the settlement.

• (3) The amount referred to in subsection (1) above is a percentage of the tax charged on so much of the value transferred by the first transfer as is attributable to the increase mentioned in that subsection ; and the percentage is—

• (a) 100 per cent, if the period beginning with the date of the first transfer and ending with the date of the later does not exceed one year ;

• (b) 80 per cent, if it exceeds one year but does not exceed two years ;

• (c) 60 per cent, if it exceeds two years but does not exceed three years;

• (d) 40 per cent, if it exceeds three years but does not exceed four years; and

• (e) 20 per cent, if it exceeds four years.

• (4) Where in relation to the first transfer there is more than one later transfer, the reduction provided for by this section shall be given only in respect of the earliest of them, unless the reduction represents less than the whole of the tax charged as mentioned in subsection (3) above; and in that case a reduction may be made in respect of subsequent transfers (in chronological order) until reductions representing the whole of that tax have been made.

• (5) For the purposes of subsection (4) above, a reduction made in accordance with paragraph (a) of subsection (3) above represents an equivalent amount of tax, a reduction made in accordance with paragraph (b)represents the amount of tax of which it is 80 per cent., and so on.

• (6) In determining for the purposes of this section whether or to what extent the value of the transferor's estate was increased by a chargeable transfer, there shall be disregarded any excluded property consisting of a reversionary interest to which he became entitled on the occasion of or before the chargeable transfer.

• (7) Where—

• (a) the value of the transferor's estate was increased in consequence of—

• (i) a gift inter vivos, or

• (ii) a disposition or determination of a beneficial interest in possession in property comprised in a settlement, and

• (b) tax under section 22(5) of the Finance Act 1975 was by reason of the gift or interest payable on a subsequent death,

this section shall apply as if the increase had been by the chargeable transfer made on the occasion of the death.

• (8) In the Finance Act 1975, section 30 and paragraph 5 of Schedule 5 (which are superseded by this section) shall cease to have effect.

• (9) This section has effect where the later transfer is made on or after 10th March 1981.

Settled property: extension of transitional relief

102

• (1) For the references to 1st April 1982 (substituted by section 23 of the Finance (No. 2) Act 1979) in

• (a) paragraph 12(6) of Schedule 5 to the Finance Act 1975 (earliest date for ten-year periodic charge on settlements without interests in possession), and

• (b) paragraph 14(2) of that Schedule (earliest date at which capital distribution bears tax at full rate),

there shall be substituted references to 1st April 1983.

• (2) Where—

• (a) under paragraph 12(6) of the said Schedule 5 the first relevant anniversary in relation to a settlement would apart from this subsection fall during the year ending with 31st March 1984, and

• (b) during that year there is a payment or transfer of assets out of the property comprised in the settlement which could not have been made except as the result of some proceedings before a court,

the first relevant anniversary shall be taken to be 1st April 1984 (but without affecting the dates of later relevant anniversaries or the dates on which capital distributions are treated as made under paragraph 12(2) of that Schedule).

• (3) Where a capital distribution made during the year ending with 31st March 1984 out of the property comprised in a settlement could not have been made except as the result of some proceedings before, a court, paragraph 14 of the said Schedule 5 shall have effect in relation to it as if it had been made on 31st March 1983.

• (4) Subsection (1)(a) above does not affect tax chargeable by virtue of sub-paragraph (2) of paragraph 12 of the said Schedule 5 (annual charge where trustees are non-resident) in respect of any year ending before 1st January 1981 ; but where in the case of any settlement tax has been charged by virtue of that sub-paragraph in respect of one or more years in a period that would have ended with a relevant anniversary but for that subsection, tax shall not be chargeable by virtue of that sub-paragraph in respect of the first year or years (up to a corresponding number) in respect of which tax would be so chargeable in the period ending with the date that becomes the first relevant anniversary by virtue of that subsection.

Trusts for the disabled

103

In relation to property transferred into settlement on or after 10th March 1981, Schedule 5 to the Finance Act 1975 shall have effect with the substitution for paragraph 19 of the following paragraph—

(19) (1) This paragraph applies to settled property held on trusts under which, during the life of a disabled person, no interest in possession in the settled property subsists and which secure that not less than half of the settled property which is applied during his life is applied for his benefit. (2) For the purposes of capital transfer tax the person mentioned in sub-paragraph (1) above shall be treated as beneficially entitled to an interest in possession in the settled property. (3) The trusts on which settled property is held shall not be treated as falling outside sub-paragraph (1) above by reason only of the powers conferred on the trustees by section 32 of the Trustee Act 1925 or section 33 of the Trustee Act (Northern Ireland) 1958 (powers of advancement). (4) The reference in sub-paragraph (1) above to a disabled person is, in relation to any settled property, a reference to a person who when the property was transferred into settlement was— (c) incapable, by reason of mental disorder within the meaning of the Mental Health Act 1959, of administering his property or managing his affairs ; or (b) in receipt of an attendance allowance under section 35 of the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975.

Reversionary interests

104

• (1) Subsections (2) and (3) of section 22 of the Finance Act 1975 (relief from charge on death for settled property to which the settlor or his spouse becomes entitled) and sub-paragraphs (5) and (6) of paragraph 4 of Schedule 5 to that Act (corresponding relief on termination of interests in possession) shall not apply in any case where their application depends upon a reversionary interest having been transferred into a settlement on or after 10th March 1981.

• (2) In Schedule 6 to the Finance Act 1975 (exempt transfers) in paragraph 15 (exceptions) after sub-paragraph (2) there shall be inserted—

(2A) Paragraphs 1 and 10 to 13 above do not apply in relation to property which is given in consideration of the transfer of a reversionary interest if, by virtue of section 23(3) above, that interest does not form part of the estate of the person acquiring it.

and in section 84(8) of the Finance Act 1976 after " (2)" there shall be inserted " (2A) ".

This subsection has effect in relation to transfers of value made on or after 10th March 1981.

• (3) In section 24(3)(aa) of the Finance Act 1975 (reversionary interest not excluded property if the settlor or his spouse is beneficially entitled to it) after the word " is " there shall be inserted the words " or has been ".

This subsection shall be deemed to have come into force on 10th March 1981 but shall not apply in relation to a reversionary interest if the person entitled to it acquired it before that date or if it is an interest under a settlement made before 16th April 1976.

Related property

105

• (1) Paragraph 7(2)(b) of Schedule 10 to the Finance Act 1975 (valuation by reference to property in discretionary settlements made before 27th March 1974) shall cease to have effect.

• (2) This section applies to transfers of value made on or after 10th March 1981.

Free loans

106

• (1) Sections 115 and 116 of the Finance Act 1976 (free loans etc.) shall cease to have effect.

• (2) This section applies where the disposition under subsection (1) of section 115 would in accordance with subsection (2) of that section be treated as made on or after 6th April 1981.

Part VI — Stamp Duty

Sale of houses at discount by local authorities etc.

107

• (1) Where a conveyance or transfer to which this section applies is subject contingently to the payment of any money (whether by virtue of that conveyance or transfer or otherwise), then, notwithstanding section 57 of the Stamp Act 1891, that money shall not be deemed to be part of the consideration in respect of which the conveyance or transfer is chargeable with ad valorem duty.

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

• (3) This section applies to any conveyance or transfer on sale of a dwelling-house (including the grant of a lease) at a discount by—

• (a) any Minister of the Crown or Northern Ireland department;

• (b) a local housing authority within the meaning of the Housing Act 1985, a county council, a district council within the meaning of the Local Government Act (Northern Ireland) 1972 or in Scotland a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994, the common good of such a council or any trust under its control;

• (c) the Housing Corporation;

• (ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (d) the Scottish Homes;

• (e) the Northern Ireland Housing Executive;

• (ea) a registered social landlord within the meaning of Part I of the Housing Act 1996;

• (f) a housing association registered—;

• (i) in Scotland, under the Housing Associations Act 1985, or

• (ii) in Northern Ireland, under Part II of the Housing (Northern Ireland) Order 1992;

• (ff) a housing action trust established under Part III of the Housing Act 1988;

• (g) a development corporation established by an order made or having effect as if made under the New Towns Act 1965 or the New Towns (Scotland) Act 1968 or an urban development corporation established by an order made under section 135 of the Local Government, Planning and Land Act 1980;

• (h) the Commission for the New Towns or a new town commission established under section 7 of the New Towns Act (Northern Ireland) 1965;

• (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (j) the Council of the Isles of Scilly;

• (k) a local policing body within the meaning of section 101(1) of the Police Act 1996, the Scottish Police Authority , or the Northern Ireland Policing Board;

• (ka) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (l) an Education and Libraries Board established under the Education and Libraries (Northern Ireland) Order 1972;

• (m) any person mentioned in paragraph (e), (i), (j) or (l) of section 1(10) of the Tenants’ Rights, Etc. (Scotland) Act 1980.

• (n) the United Kingdom Atomic Energy Authority

• (o) such other body as the Treasury may, by order made by statutory instument, prescribe for the purposes of this section

• (3A) This section also applies to any conveyance or transfer on sale of a dwelling house where the conveyance or transfer is made pursuant to a sub-sale made at a discount by a body falling within subsection (3)(ea) or (f)above.

• (3B) This section also applies to a conveyance or transfer on sale (including the grant of a lease) by a person against whom the right to buy under Part V of the Housing Act 1985 is exercisable by virtue of section 171A of that Act (preservation of right to buy on disposal to private sector landlord) to a person who is the qualifying person for the purposes of the preserved right to buy and in relation to whom that dwelling-house is the qualifying dwelling-house.

• (3C) A grant under section 20 or 21 of the Housing Act 1996 (purchase grants in respect of disposals at a discount by registered social landlords) shall not be treated as part of the consideration for a conveyance or transfer to which this section applies made by a body falling within subsection (3)(ea) above.

• (4) This section applies to instruments executed on or after 23rd March 1981 and shall be deemed to have come into force on that date.

Shared ownership transactions

108

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

Index-linked loan capital

109

Pooled pension funds

110

Part VII — Petroleum Revenue Tax

Restriction of expenditure supplement

111

• (1) Expenditure taken into account under section 2(9) (b)(i) or (c)(i) of the Oil Taxation Act 1975 (“the principal Act”) in computing the assessable profit or allowable loss accruing to a participator in a chargeable period from an oil field shall not qualify for supplement under section 2(9)(b)(ii) or (c)(ii) of that Act if it is incurred after the end of the chargeable period (“the net profit period”) which is the earliest chargeable period ending after a development decision has been made for the field in which—

• (a) the amount of oil won and saved from the field exceeds 1,000 metric tonnes (counting 1,100 cubic metres of gas at a temperature of 15 degrees centigrade and pressure of one atmosphere as equilavent to one metric tonne); and

• (b) a net profit from the field accrues to the participator;

and subsection (7) of section 5A of the principal Act (time when development decision is made) shall apply for the purposes of this subsection as it applies for the purposes of subsection (1)(c) of that section.

• (2) Subject to subsections (3) and (4) below, a net profit shall be treated as having accrued to a participator from an oil field in a chargeable period when the total assessable profits (without any reduction under section 7 or 8 of the principal Act) that have accrued to him from the field in chargeable periods up to and including that period exceed the aggregate of the total allowable losses that have so accrued to him and the total amount of advance petroleum revenue tax paid by him in respect of that field for chargeable periods up to and including that period.

• (2A) For the purposes of subsection (2) above the total amount of advance petroleum revenue tax paid by the participator does not include any amount of that tax repaid to him before the end of the chargeable period first referred to in that subsection or any amount of that tax subsequently repaid to him under section 142(1) of the Finance Act 1982 or under paragraph 9 of Schedule 19 to that Act.

• (3) In determining for the purposes of subsection (2) above whether any, and if so what, assessable profit or allowable loss has accrued to a participator from an oil field in a chargeable period—

• (a) there shall be excluded from its computation any expenditure allowed under Schedule 7 and any loss allowed under Schedule 8 to the principal Act (abortive exploration expenditure exploration and appraisal expenditure and unrelievable field losses);

• (b) any election under paragraph 9(1) of Schedule 3 to that Act (spreading of allowable expenditure) shall be disregarded; and

• (c) in the case of the last chargeable period taken into account in deciding what is the net profit period there shall be included in that computation any amount which, by reason of an adjustment under section 4(9) of that Act (long-term assets) for a claim period ending not later than that period, will fall to be taken into account under paragraph 6 of Schedule 4 to that Act for the next chargeable period and

• (d) if any qualifying tariff receipts, within the meaning of section 9 of the Oil Taxation Act 1983, are received or receivable by the participator for that period, any amount by which those receipts are treated as reduced by virtue of that section shall be brought into account in that computation as an addition to the positive amounts referred to in section 2(3)(a) of the principal Act.

• (4) A net profit shall not by virtue of subsection (2) above be treated as having accrued to a participator from an oil field in a chargeable period if—

• (a) after an assessment or determination has been made in respect of that period under paragraph 10 of Schedule 2 to the principal Act any expenditure incurred before the end period is allowed on a claim under Schedule 5 or Schedule 6 to that Act; and

• (b) a net profit would not have accrued to the participator from the field in that period if that expenditure (or, as respects expenditure allowed under Schedule 5, his share of it) had been taken into account in the assessment or determination together with any amount falling to be taken into account under section 2(9)(b)(ii) or (c)(ii) of the principal Act by reference to (or, as the case may be, to his share of) that expenditure.

• (5) The expenditure referred to in subsection (4) above does not include expenditure allowed for any claim period beginning after the chargeable period in respect of which the assessment or determination was made.

• (6) In the following provisions, that is to say—

• (a) paragraphs 2(4)(a) and 3(1)(b) of Schedule 5 to the principal Act (claims for and determination of expenditure qualifying for supplement), including those paragraphs as applied by Schedule 6 to that Act;

• (b) paragraph 2(4)(b) of the Schedule to the Petroleum Revenue Tax Act 1980 (computation of payment on account),