Income and Corporation Taxes Act 1988

• (1) No deduction is allowed for expenses in providing shares that are acquired on behalf of individuals under an approved share incentive plan as dividend shares.

• (2) This is subject to paragraph 8 (deductions for contributions to running expenses of plan).

Treatment of forfeited shares

6

• (1) This paragraph applies if any of a participant’s plan shares are forfeited.

• (2) The shares are treated for the purposes of this Schedule as acquired by the trustees—

• (a) when the forfeiture occurs, and

• (b) for no consideration.

• (3) No deduction is allowed under paragraph 2 or 3 (deductions for providing free or matching shares or for additional expenses in providing partnership shares) in respect of any subsequent award of those shares under the plan.

Deduction for costs of setting up the plan

7

• (1) A deduction is allowed under this paragraph for expenses incurred by a company in establishing a share incentive plan which is approved by the Inland Revenue.

• (2) No deduction may be made under this paragraph if—

• (a) any employee acquires rights under the plan, or

• (b) the trustees acquire any shares for the purposes of the plan,

before the Inland Revenue approve the plan.

• (3) If Inland Revenue approval of the plan is given more than nine months after the end of the period of account in which the expenses are incurred, the expenses are treated for the purposes of this paragraph as deductible for the period in which the approval is given.

• (4) No other deduction is allowed in respect of expenses for which a deduction is allowed under this paragraph.

Deductions for contributions to running expenses of plan

8

• (1) Nothing in this Schedule affects any deduction for expenses incurred by a company in contributing to the expenses of the trustees in operating an approved share incentive plan.

• (2) For this purpose the expenses of the trustees in operating the plan—

• (a) do not include expenses in acquiring shares for the purposes of the trust, other than incidental acquisition costs, but

• (b) do include the payment of interest on money borrowed by them for that purpose.

• (3) In sub-paragraph (2)(a) “incidental acquisition costs” means any fees, commission, stamp duty and similar incidental costs attributable to the acquisition of the shares.

Deduction for contribution to plan trust

9

• (1) A deduction is allowed to a company under this paragraph where—

• (a) on or after 6th April 2003, that company makes a payment to the trustees of an approved share incentive plan in order to enable them to acquire shares in that company or a company which controls it,

• (b) the payment is applied by the trustees to acquire such shares,

• (c) the shares are not acquired from a company, and

• (d) the condition in sub-paragraph (2) is met in relation to the company in which the shares are acquired.

• (2) The condition in this sub-paragraph is that, at the end of the period of 12 months beginning with the date of the acquisition, the trustees hold shares in the company for the plan trust that—

• (a) constitute not less than 10 per cent of the ordinary share capital of the company, and

• (b) carry rights to not less than 10 per cent of—

• (i) any profits available for distribution to shareholders of the company,

• (ii) any assets of that company available for distribution to its shareholders in the event of a winding-up.

• (3) For the purposes of sub-paragraph (2), shares that have been appropriated to, and acquired on behalf of, an individual under the plan shall continue to be treated as held by the trustees of the plan trust for the beneficiaries of that trust until such time as they cease to be subject to the plan (within the meaning of the SIP code).

• (4) A deduction allowed under this paragraph—

• (a) is of an amount equal to the amount of the payment referred to in sub-paragraph (1), and

• (b) must be made for the period of account in which the condition in sub-paragraph (2) is met.

• (5) No other deduction is allowed for any amount in respect of which a deduction has been made under this paragraph (except as specified in paragraph 10).

Withdrawal of deduction under paragraph 9

10

• (1) The Inland Revenue may by notice direct that the benefit of a deduction made under paragraph 9 is withdrawn where—

• (a) fewer than 30 per cent of the shares acquired by virtue of the payment in respect of which the deduction is made have been awarded under the plan before the end of the period of 5 years beginning with the date of acquisition, or

• (b) not all the shares acquired by virtue of that payment have been so awarded before the end of the period of 10 years beginning with that date.

• (2) The effect of a direction under sub-paragraph (1)(a) or (b) is that the amount of the deduction is treated as a trading receipt of the company for the period of account in which the direction is given.

• (3) However, where—

• (a) the Inland Revenue give a direction under sub-paragraph (1)(a) or (b) in respect of any deduction, and

• (b) at any time after the giving of the direction, all the shares acquired by virtue of the payment in respect of which the deduction was made are awarded under the plan,

a further deduction is allowed under this sub-paragraph to the company which made the payment.

• (4) A deduction under sub-paragraph (3)—

• (a) is of an amount equal to the amount of the payment referred to in that sub-paragraph, and

• (b) must be made for the period of account in which sub-paragraph (3)(b) is first satisfied.

• (5) No other deduction is allowed in respect of any amount for which a deduction has been made under sub-paragraph (3).

• (6) Sub-paragraph (8) applies where—

• (a) a deduction is made under paragraph 9 (deduction for contribution to plan trust) or sub-paragraph (3) in respect of a payment for the acquisition of shares, but

• (b) shares are awarded under the plan to an individual at a time when the earnings from the required employment are not (or would not be if there were any) chargeable earnings.

• (7) In sub-paragraph (6) “required employment” and “chargeable earnings”, in relation to an individual, have the same meanings as they have in paragraph 4(2) (cases in which no deduction is allowed).

• (8) An amount equal to the appropriate proportion of the deduction is treated as a trading receipt of the company for the period of account in which the shares are so awarded.

• (9) For the purposes of sub-paragraph (8), the appropriate proportion of the deduction is the proportion which the number of shares awarded to the individual bears to the total number of shares acquired by virtue of the payment.

• (10) For the purposes of this paragraph, where shares are acquired by the trustees on different days, it shall be assumed that those acquired on an earlier day are awarded to employees under the plan before those acquired by the trustees on a later day.

Withdrawal of deductions on withdrawal of approval

11

• (1) If approval of a share incentive plan is withdrawn the Inland Revenue may by notice to a company direct that the benefit of—

• (a) any deductions under paragraph 2 (deduction for providing free or matching shares),

• (b) any deductions under paragraph 3 (deduction for additional expenses in providing partnership shares),

• (c) any deductions under paragraph 9 (deduction for contribution to plan trust) (in so far as not already withdrawn under paragraph 10), or

• (d) any deductions under paragraph 10(3) (further deduction where deduction under paragraph 9 withdrawn),

in relation to the plan is also withdrawn.

• (2) The effect of the direction is that the aggregate amount of the deductions is treated as a trading receipt of that company for the period of account in which the Inland Revenue give notice of the withdrawal of approval.

Termination of plan: shares acquired as mentioned in paragraph 9 but not yet awarded

12

• (1) This paragraph applies where the company has issued a plan termination notice under paragraph 89 of Schedule 2 to ITEPA 2003 (termination of plan).

• (2) In a case where—

• (a) by virtue of a payment made to the trustees by the company, the trustees acquire shares in the company, or a company which controls it,

• (b) a deduction under paragraph 9 (deduction for contribution to plan trust) has been made in respect of that payment (and has not been withdrawn under paragraph 10), and

• (c) not all the shares acquired by virtue of the payment have been awarded under the plan before issue of the plan termination notice,

an amount equal to the appropriate proportion of the deduction is treated as a trading receipt of the company for the period of account in which the plan termination notice is given.

• (3) For the purposes of sub-paragraph (2), the appropriate proportion of the deduction is the proportion which the number of shares acquired by virtue of the payment and not awarded as specified in sub-paragraph (2)(c) bears to the total number of shares so acquired.

Application of provisions to expenses of management of companies with investment business etc

13

• (1) The provisions of this Schedule apply in relation to—

• (a) companies with investment business, and

• (b) companies in relation to which section 76 applies (expenses of insurance companies),

in accordance with the following provisions.

• (2) The provisions of this Schedule which allow a deduction in calculating the profits of a trade apply—

• (a) in relation to a company with investment business, to treat amounts as expenses of management, and

• (b) in relation to companies in relation to which section 76 applies, to treat amounts as expenses payable falling to be brought into account at Step 1 in section 76(7).

• (3) Paragraph 11(2) applies as if the reference to a trading receipt for the period of account in which the Inland Revenue give notice of the withdrawal of approval were a reference to profits or gains chargeable to tax under Case VI of Schedule D arising when the Inland Revenue give notice of the withdrawal.

SCHEDULE 4A

Accounting periods

1

This Schedule enables an individual (“the taxpayer”) to make a claim (an “averaging claim”) if his profits from a qualifying trade, profession or vocation (his “relevant profits”) fluctuate from one tax year to the next.

2

• (1) A trade, profession or vocation is a “qualifying trade, profession or vocation” if the taxpayer’s profits from it—

• (a) are derived wholly or mainly from qualifying creative works, and

• (b) are chargeable to tax under Case I or II of Schedule D.

• (2) In sub-paragraph (1) “qualifying creative works” means—

• (a) literary, dramatic, musical or artistic works, or

• (b) designs,

created by the taxpayer personally or, where the trade, profession or vocation is carried on by the taxpayer in partnership, by one or more of the partners personally.

3

• (1) An averaging claim may be made if the taxpayer has been carrying on the qualifying trade, profession or vocation in two consecutive tax years and either—

• (a) his relevant profits for one of the tax years are less than 75% of his relevant profits for the other, or

• (b) his relevant profits for one (but not both) of the tax years are nil.

• (2) For the purposes of paragraph 4 (years in respect of which averaging claim may be made) an averaging claim relates to both of the years involved.

4

• (1) An averaging claim may not be made in relation to a tax year if an averaging claim in respect of the same qualifying trade, profession or vocation has already been made in relation to a later tax year.

• (2) An averaging claim may not be made in relation to a tax year in which—

• (a) the taxpayer starts, or permanently ceases, to carry on the trade, profession or vocation, or

• (b) the trade, profession or vocation begins or ceases to be a qualifying trade, profession or vocation.

• (3) An averaging claim may be made in relation to a tax year which was the later year on a previous averaging claim.

5

An averaging claim must be made not later than twelve months after the 31st January next following the end of the later of the tax years to which it relates.

The mixed pool of qualifying E&A expenditure and supplement previously allowed

6

• (1) Where the taxpayer is entitled to make, and makes, an averaging claim, the amount taken to be his profits from the qualifying trade, profession or vocation for each of the tax years to which the claim relates is adjusted in accordance with this paragraph.

• (2) If—

• (a) the taxpayer’s relevant profits for one of the years amount to 70% or less of his relevant profits for the other year, or

• (b) the taxpayer’s relevant profits for one (but not both) of the years are nil,

the amount of the adjusted profits for each of the years to which the claim relates is the average of the relevant profits for the two years.

• (3) If the taxpayer’s relevant profits for one of the years amount to more than 70%, but less than 75%, of his relevant profits for the other year, the amount of the profits in each of the years is calculated as follows, so as to reduce the variation between them.

Step 1

The amount of the adjustment is given by the formula—

$$(D×3)-(P×0.75)$where—D is the difference between the taxpayer’s relevant profits for the two tax years, andP is the taxpayer’s relevant profits for the year in which those profits are higher.$

Step 2

Add the amount of the adjustment to the taxpayer’s relevant profits for the year in which those profits are lower.

The result is the amount of the adjusted profits for that year.

Step 3

Subtract the amount of the adjustment from the taxpayer’s relevant profits for the year in which those profits are higher.

The result is the amount of the adjusted profits for that year

• (4) Subject to the following provisions of this Schedule, the adjusted profits are taken to be the taxpayer’s relevant profits for the years to which the claim relates for all the purposes of the Income Tax Acts, including the further application of this Schedule.

7

• (1) An averaging claim relating to two tax years (“the earlier year” and “the later year”) is given effect in the later year.

• (2) In so far as the claim involves an adjustment to the profits for the earlier year it is treated as a claim for the amount of the difference between—

• (a) the amount in which the taxpayer is chargeable to tax for the earlier year (“amount A”), and

• (b) the amount in which he would be so chargeable if effect were given to the adjustment in that year (“amount B”).

• (3) That claim is given effect in the later year by increasing the amount referred to in section 59B(1)(b) of the Management Act (aggregate amount of payments on account made by the taxpayer) or, as the case may require, by increasing the amount of tax payable.

• (4) Where effect falls to be given to two or more associated claims, amounts A and B above shall each be determined on the assumption that effect could have been, and had been, given to the other claim or claims in relation to the earlier year.

• (5) Where this paragraph applies twice in relation to the same tax year, the increase or reduction in the amount of tax payable for that year as a result of the earlier application shall be disregarded in determining amounts A and B above for the purposes of the later application.

8

• (1) A claim by the taxpayer for relief under any other provision of the Income Tax Acts for either of the years to which an averaging claim relates (“the other claim”)—

• (a) is not out of time if made on or before the last date on which the averaging claim could have been made, and

• (b) if already made, may be amended or revoked on or before that date.

• (2) If the other claim is made by being included in a return, the reference in sub-paragraph (1)(b) to amending or revoking the claim shall be read as a reference to amending the return by amending or omitting the claim.

9

• (1) This paragraph applies where—

• (a) the taxpayer makes or amends a claim for relief under any other provision of the Income Tax Acts for either of the years to which an averaging claim relates, and

• (b) the making or amendment of the claim would be out of time but for paragraph 8.

• (2) The claim or amendment is given effect in the later year.

• (3) In so far as the claim or amendment relates to income of the earlier year, the amount claimed, or (as the case may be) the increase or reduction in the amount claimed, shall be equal to the difference between—

• (a) the amount in which the taxpayer is chargeable to tax for the earlier year (“amount A”), and

• (b) the amount in which he would be so chargeable on the assumption that effect could be, and was, given to the claim or amendment in relation to that year (“amount B”).

• (4) That claim or amendment is given effect in the later year by increasing the amount referred to in section 59B(1)(b) of the Management Act (aggregate amount of payments on account made by the taxpayer) or, as the case may require, by increasing the amount of tax payable.

• (5) Where effect falls to be given to two or more associated claims, amounts A and B above shall each be determined on the assumption that effect could have been, and had been, given to the other claim or claims in relation to the earlier year.

• (6) In this paragraph “amend” includes revoke and “amendment” has a corresponding meaning.

10

• (1) If after the taxpayer has made an averaging claim, his relevant profits in either or both of the tax years to which the claim relates are adjusted for some other reason—

• (a) the averaging claim shall be disregarded, and

• (b) a further averaging claim may be made in relation to the taxpayer’s relevant profits as adjusted.

• (2) A further averaging claim is not out of time provided it is made not later than twelve months after the 31st January next following the tax year in which the adjustment for the other reason is made.

11

• (1) References in this Schedule to the taxpayer’s profits from a qualifying trade, profession or vocation are to profits before making deductions for losses sustained in any tax year.

• (2) If the taxpayer sustains a loss in the qualifying trade, profession or vocation in any tax year, the profits of that year for the purposes of this Schedule are nil.

This shall not be read as preventing the taxpayer from obtaining relief under the Income Tax Acts for a loss sustained by him in that or any other tax year.

12

In this Schedule any reference to the amount in which a person is chargeable to tax is a reference to the amount in which he is so chargeable after taking into account any relief or allowance for which a claim is made.

13

• (1) In this Schedule any reference to a claim includes a reference to an election or notice.

• (2) For the purposes of this Schedule, two or more claims made by the same person are associated with each other if each of them is any of the following—

• (a) a claim to which this Schedule applies, or

• (b) a claim to which Schedule 1B to the Management Act applies (other claims involving more than one year to be given effect in later year),

and the same tax year is the earlier year in relation to each of those claims.

• (3) In sub-paragraph (2)—

• (a) the reference to a claim to which this Schedule applies includes amendments and revocations to which paragraph 9 above applies;

• (b) the reference to a claim to which Schedule 1B to the Management Act applies includes amendments and revocations to which paragraph 4 of that Schedule applies.

14

In this Schedule a “tax year” means a year of assessment.

SCHEDULE 5AA

Charge to tax etc.

1

• (1) Subject to sub-paragraph (2) below, profits and gains arising from a transaction to which this Schedule applies (including those which, apart from this sub-paragraph, would be taken to be of a capital nature) shall be treated, when realised—

• (a) as income of the person by whom they are realised; and

• (b) as chargeable to tax under Case VI of Schedule D for the chargeable period in which they are realised.

• (2) Sub-paragraph (1) above does not apply to—

• (a) so much of any profits or gains arising to a person from a transaction as are charged to tax in his case under Case I or V of Schedule D;

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

• (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

• (4) For the purposes of this Schedule the profits and gains arising from a transaction to which this Schedule applies are to be taken to be realised at the time when the disposal comprised in the transaction takes place.

• (5) For the purposes of sections 392 . . . any loss in a transaction to which this Schedule applies is to be taken to be sustained at the time when, in accordance with sub-paragraph (4) above, any profits or gains arising from that transaction would have been realised.

• (6) Subject to sub-paragraph (7) below, the following, namely—

• (a) profits and gains to which sub-paragraph (1) above applies, and

• (b) losses in transactions the profits and gains from which (if there were any) would be profits and gains to which that sub-paragraph applies,

shall not be brought into account for the purposes of income tax . . . or capital gains tax except by virtue of this Schedule and, in the case of losses, section 392 . . . .

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

Transactions to which Schedule applies

2

• (1) This Schedule applies to a transaction if—

• (a) it is a disposal of futures or options;

• (b) it is one of two or more related transactions designed to produce a guaranteed return; and

• (c) the guaranteed return comprises the return from that disposal or from a number of disposals of futures or options, of which that disposal is one, taken together.

• (2) For the purposes of this Schedule two or more related transactions are transactions designed to produce a guaranteed return if, taking the transactions together, it would be reasonable to assume, from either or both of—

• (a) the likely effect of the transactions, and

• (b) the circumstances in which the transactions are entered into, or in which any of them is entered into,

that their main purpose, or one of their main purposes, is or was the production of a guaranteed return from one or more disposals of futures or options.

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

Production of guaranteed return

3

• (1) For the purposes of this Schedule a guaranteed return is produced from one or more disposals of futures or options wherever (taking all the disposals together where there is more than one) risks from fluctuations in the underlying subject matter are so eliminated or reduced as to produce a return from the disposal or disposals—

• (a) the amount of which is not, to any significant extent, attributable (otherwise than incidentally) to any such fluctuations; and

• (b) which equates, in substance, to the return on an investment of money at interest.

• (2) For the purposes of sub-paragraph (1) above the cases where risks from fluctuations in the underlying subject matter are eliminated or reduced shall be deemed to include any case where the main reason, or one of the main reasons, for the choice of that subject matter is—

• (a) that there appears to be no risk that it will fluctuate; or

• (b) that the risk that it will fluctuate appears to be insignificant.

• (3) In this paragraph the references, in relation to a disposal of futures or options, to the underlying subject matter are references to or to the value of the commodities, currencies, shares, stock or securities, interest rates, indices or other matters to which, or to the value of which, those futures or options are referable.

Disposals of futures or options

4

• (1) For the purposes of this Schedule a disposal is a disposal of futures or options if it consists in—

• (a) the disposal of one or more futures;

• (b) the disposal of one or more options; or

• (c) the disposal of one or more futures together with one or more options.

• (2) Subject to sub-paragraph (4) below, any question for the purposes of this Schedule as to whether there is a disposal falling within sub-paragraph (1)(a) to (c) above, or as to when such a disposal is made, shall be determined, on the assumptions specified in sub-paragraph (3) below, in accordance with—

• (a) section 143(5) and (6), 144 and 144A of the 1992 Act (closing out and settlement of futures contracts and rules in relation to options); and

• (b) the other provisions having effect for determining for the purposes of that Act whether or when an asset is disposed of;

and references in this Schedule to entering into a transaction are references, in relation to a transaction consisting in a disposal, to the making of the disposal.

• (3) Those assumptions are—

• (a) that all futures are assets for the purposes of the 1992 Act;

• (b) that the words “in the course of dealing in commodity or financial futures” are omitted in each place where they occur in section 143(5) and (6) of that Act; and

• (c) that any reference in that Act to a financial option within the meaning given by section 144(8) of that Act is a reference to any option that is not a traded option.

• (4) Subject to sub-paragraph (5) below, where—

• (a) one of a number of related transactions designed to produce a guaranteed return is the grant of an option,

• (b) at least one of the other transactions is a transaction entered into after the grant of the option, and

• (c) the transaction or transactions entered into after the grant of the option is or include a disposal which is not itself the grant of an option,

the disposal consisting in the grant of the option shall be deemed for the purposes of this Schedule to be a disposal made on the first occasion after the grant of the option when one of the other transactions which is a disposal but is not itself the grant of an option is entered into.

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

• (5) Nothing in sub-paragraph (4) above affects so much of sub-paragraph (2) above as (by applying section 144(2) or 144A(2) of the 1992 Act (cases where options are exercised))—

• (a) requires the grant of an option and the transaction entered into by the grantor in fulfilment of his obligations under that option to be treated for the purposes of this Schedule as a single transaction; or

• (b) determines the time at which such a single transaction is to be treated for the purposes of this Schedule as entered into.

• (6) In this paragraph—

• “future” means outstanding rights and obligations under a commodity or financial futures contract;

• “option” means a traded option or an option which is not a traded option but is an option relating to—currency, shares, stock, securities or an interest rate; orrights under a commodity or financial futures contract;and includes any liability or entitlement under an option.

• “traded option” has the meaning given for the purposes of subsection (4) of section 144 of the 1992 Act by subsection (8) of that section.

Futures running to delivery and options exercised

4A

• (1) This paragraph applies where for the purposes of this Schedule—

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

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

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

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

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

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

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

• (3) That transaction is a disposal of the future or option which—

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

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

• (i) is made for a nil consideration; and

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

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

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

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

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

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

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

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

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

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

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

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

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

• (8) That occasion is—

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

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

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

• (a) of the profits arising to the grantor of the option from that disposal, or

• (b) of the losses for the grantor in that disposal,

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

• (10) In sub-paragraph (8) above—

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

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

• (10A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (11) In this paragraph—

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

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

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

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

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

The return from one or more disposals

5

• (1) In this Schedule references to the return from one or more disposals are references to the return on investment represented either—

• (a) by the total net profits and gains arising from the disposal or disposals; or

• (b) by all but an insignificant part of those net profits and gains.

• (2) For the purposes of the references in sub-paragraph (1) above to the total net profits and gains from any two or more disposals, it shall be assumed that profits and gains realised, and losses sustained, by persons who are associated with each other are all realised or sustained by the same person.

• (3) For the purposes of sub-paragraph (2) above persons are associated with each other in relation to any two or more disposals made in pursuance of the same scheme or arrangements if—

• (a) each of those persons shares or is to share, to an extent determined for the purposes of or in accordance with the scheme or arrangements, in the net return represented by the aggregate of all the profits, gains and losses realised or sustained on those disposals;

• (b) those persons are associated companies at the time when the last of those disposals is made; or

• (c) those persons have been associated companies at an earlier time falling after the first occasion on which a transaction was entered into in pursuance of the scheme or arrangements.

• (4) In this paragraph—

• “associated company” shall be construed in accordance with section 416; and

• “scheme or arrangements” shall be construed in accordance with paragraph 6(4) below.

Related transactions

6

• (1) For the purposes of this Schedule two or more transactions are related if all of them are entered into in pursuance of the same scheme or arrangements.

• (2) Nothing in this Schedule shall be construed as preventing transactions with different parties, or transactions with parties different from the parties to the scheme or arrangements in pursuance of which they are entered into, from being related transactions.

• (3) For the purposes of this paragraph the cases in which any two or more transactions are to be taken to be entered into in pursuance of the same scheme or arrangements shall include any case in which it would be reasonable to assume, from either or both of—

• (a) the likely effect of the transactions, and

• (b) the circumstances in which the transactions are entered into, or in which any of them is entered into,

that neither of them or, as the case may be, none of them would have been entered into independently of the other or others.

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

• (4) In this paragraph “scheme or arrangements” includes schemes, arrangements and understandings of any kind, whether or not legally enforceable.

Special rule for trusts

7

• (1) Where any profits or gains are treated, in accordance with paragraph 1 above, as income arising to trustees for any year of assessment, the relevant part of that income shall be treated for the purposes of the Tax Acts as if it were income to which section 686 applies (income taxable at the rate applicable to trusts).

• (2) In sub-paragraph (1) above the reference to the relevant part of any income is a reference to so much (if any) of that income as—

• (a) does not fall to be treated for the purposes of the Income Tax Acts as income of a settlor;

• (b) is not income arising under a trust established for charitable purposes; and

• (c) is not income from investments, deposits or other property held for any such purposes as are mentioned in sub-paragraph (i) or (ii) of section 686(2)(c) (property held for pension purposes).

• (3) Subsection (6) of section 686 (meaning of “trustees” etc.) shall apply for the purposes of this paragraph as it applies for the purposes of that section.

Transfer of assets abroad

8

For the purpose of determining whether an individual ordinarily resident in the United Kingdom has a liability for income tax in respect of any profit or gain which—

• (a) is realised by a person resident or domiciled outside the United Kingdom, and

• (b) arises from a transaction to which this Schedule applies,

sections 739 and 740 (transfer of assets abroad) shall have effect as if that profit or gain, when realised, constituted income becoming payable to the person resident or domiciled outside the United Kingdom.

Apportionment in the case of insurance companies

9

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

SCHEDULE 5A

Introductory

1

• (1) In this Schedule—

• (a) “approved stock lending arrangement” means an arrangement such as is mentioned in subsection (1), (2) or (2A) of section 129 and in relation to which that section and section 271(9) of the 1992 Act apply;

• (b) “the borrower”, in relation to such an arrangement, means the person to whom the securities are transferred under the arrangement; and

• (c) “the lender” means the person making that transfer and to whom, in return, securities of the same kind and amount are to be transferred.

• (2) References in this Schedule to the borrower or lender under an approved stock lending arrangement include any person acting as the nominee of the borrower or lender.

Treatment of interest earned on cash collateral

2

• (1) This paragraph applies where in connection with an approved stock lending arrangement—

• (a) the borrower pays to the lender an amount (“cash collateral”) by way of security for the performance of the obligation to transfer to the lender securities of the same kind and amount as those transferred by him;

• (b) interest is earned by the lender on the whole of the cash collateral in respect of the period for which he holds it, and is paid to him without deduction of tax; and

• (c) the lender pays to the borrower an amount (“rebate interest”) equal to the amount of interest earned by him on the cash collateral.

• (2) Where this paragraph applies—

• (a) the interest earned by the lender on the cash collateral shall be treated for all purposes of the Tax Acts as the income of the borrower and not as the income of the lender;

• (b) the lender shall not be required to deduct from the payment of rebate interest any sum representing income tax thereon;

• (c) no relief shall be given to the lender in respect of the payment under any provision of the Tax Acts; and

• (d) the rebate interest shall not be regarded as the income of the borrower.

• (3) This paragraph does not apply unless the amount of the rebate interest is identified as such by the parties separately from any fee or other amount payable in connection with the arrangement.

Application of paragraph 2 in case of chain of arrangements

3

• (1) Where the lender under one or more approved stock lending arrangements (“the lending arrangements”) is also the borrower under one or more other such arrangements (“the borrowing arrangements”) entered into to enable him to fulfil his obligations under the former arrangements, the interest which by virtue of paragraph 2(2)(a) above as it applies in relation to the borrowing arrangements is treated as his (the “attributed interest”) shall be treated for the purposes of that paragraph as it applies in relation to the lending arrangements as interest earned by him on the cash collateral provided under those arrangements, as follows.

• (2) Where the aggregate amount of the cash collateral provided under the borrowing arrangements equals that provided under the lending arrangements, the whole of the attributed interest shall be so treated.

• (3) Where the aggregate amount of the cash collateral provided under the borrowing arrangements exceeds that provided under the lending arrangements, a part of the attributed interest shall be so treated.

• (4) Where the aggregate amount of the cash collateral provided under the borrowing arrangements is less than that provided under the lending arrangements, the attributed interest shall be treated as earned by him on a part of the cash collateral provided under the lending arrangements.

Interpretation

4

In this Schedule—

• “relief” means relief by way of—deduction in computing profits or gains, ordeduction or set off against income or total profits; and

• “securities” includes stocks and shares.

Schedule 6A

Part I — Basic Case

Cash equivalent

1

• (1) This paragraph applies where the van mentioned in section 159AA(1)—

• (a) is not a van to which Part II of this Schedule applies for the year concerned, or

• (b) is a van to which that Part applies for the year concerned but is a shared van (within the meaning there given) for part only of the year.

• (2) Subject to paragraphs 2 and 3 below, the cash equivalent of the benefit is—

• (a) £500, if the van is aged less than 4 years at the end of the year concerned;

• (b) £350, if the van is aged 4 years or more at the end of the year concerned.

Reductions for periods where van unavailable

2

• (1) Subject to paragraph 3 below, where paragraph 1 above applies and for any part of the year concerned—

• (a) the van is unavailable, or

• (b) the van is a shared van (within the meaning given by Part II of this Schedule),

the cash equivalent of the benefit is the amount ascertained under paragraph 1 above (the full amount) reduced by an amount which bears to the full amount the same proportion as the number of excluded days in the year bears to 365.

• (2) For the purposes of sub-paragraph (1) above a van is to be treated as being unavailable on any day if—

• (a) the day falls before the first day on which the van is available to the employee,

• (b) the day falls after the last day on which the van is available to the employee, or

• (c) the day falls within a period, of 30 days or more, throughout which the van is not available to the employee.

• (3) For the purposes of sub-paragraph (1) above an excluded day is a day on which the van falls within paragraph (a) or (b) of that sub-paragraph.

Reduction for payments for use of van

3

• (1) Where paragraph 1 above applies and in the year concerned the employee is required, as a condition of the van being available for his private use, to pay any amount of money (whether by way of deduction from his emoluments or otherwise) for that use, then—

• (a) if the amount ascertained under paragraphs 1 and 2 above exceeds the relevant sum, the cash equivalent of the benefit is an amount equal to the excess;

• (b) if the relevant sum exceeds or is equal to the amount ascertained under paragraphs 1 and 2 above, the cash equivalent of the benefit is nil.

• (2) In sub-paragraph (1) above—

• (a) “the relevant sum” means the amount paid by the employee, as there mentioned, in respect of the year concerned, and

• (b) the reference to the van being available for the employee’s private use includes a reference to the van being available for the private use of others being members of his family or household.

• (3) If the van is a shared van (within the meaning given by Part II of this Schedule) for part of the year concerned, the reference in sub-paragraph (2) above to the year shall be construed as a reference to the part of the year when the van is not a shared van.

Part II — SHARED VANS

Introduction

4

• (1) This Part of this Schedule applies to a van for a year if it is a shared van for any period in the year.

• (2) A van is a shared van for a period if the period is one throughout which the van is available concurrently to more than one employee of the same employer.

• (3) A van is also a shared van for a period if—

• (a) the period is one throughout which the van is available to different employees of the same employer, but

• (b) the circumstances are such that the employee or employees to whom the van is available at any given time in the period are not necessarily the same as the employee or employees to whom it is available at any other given time in the period.

• (4) But if the van is available to one employee only for a period exceeding 30 days (an exclusive period)—

• (a) the exclusive period shall not count towards any period that would otherwise fall within sub-paragraph (3) above;

• (b) any period falling within sub-paragraph (3) above shall be treated as ending when the exclusive period begins (without prejudice to the start after the exclusive period of a further period falling within sub-paragraph (3) above).

• (5) If a van would (apart from this sub-paragraph) be treated as shared during part of a day it shall be treated as shared throughout the day.

Benefit to employee

5

• (1) This paragraph applies where for any year this Part of this Schedule—

• (a) applies to a van, or

• (b) applies to each of two or more vans made available by the same employer.

• (2) For the purposes of this paragraph a participating employee is an employee to whom—

• (a) the van is available for his private use while it is a shared van (where only one van is involved),

• (b) one of the vans is available for his private use while it is a shared van (where more than one van is involved), or

• (c) some or all of the vans are available for his private use while they are shared vans (where more than one van is involved);

but an employee is not a participating employee unless he makes private use of the van, or (if more than one is involved) he makes private use of at least one of them, at least once while it is a shared van.

• (3) In sub-paragraph (2) above—

• (a) any reference to a van being available for an employee’s private use includes a reference to the van being available for the private use of others being members of his family or household, and

• (b) any reference to an employee making private use of a van includes a reference to a member of his family or household making private use of it.

• (4) This paragraph shall apply to each participating employee in the same way, irrespective of—

• (a) the number available to a particular employee of the vans involved;

• (b) the fact that a particular van involved is or is not available to him or used by him;

• (c) the extent to which a particular van involved is available to him or used by him.

• (5) Where this paragraph applies—

• (a) find the basic value of the van for the year or (as the case may be) the basic value for the year of each van involved;

• (b) take that basic value or (as the case may be) the aggregate of those basic values;

• (c) find for each participating employee a portion of the figure taken under paragraph (b) above by dividing it equally among the participating employees.

• (6) The figure found for a participating employee shall be taken to be the cash equivalent of the benefit to him in the year of—

• (a) the van available to him while it is a shared van (where only one van is involved or only one of the vans involved is available to him), or

• (b) the vans available to him while they are shared vans (where more than one van is involved and more than one of them is available to him).

Basic value

6

• (1) Subject to sub-paragraph (2) below, the basic value of a van for a year is—

• (a) £500, if the van is aged less than 4 years at the end of the year concerned;

• (b) £350, if the van is aged 4 years or more at the end of the year concerned.

• (2) Where for any part of the year—

• (a) the van is not a shared van, or

• (b) the van is incapable of use,

its basic value is the amount ascertained under sub-paragraph (1) above (the full value) reduced by an amount which bears to the full value the same proportion as the number of excluded days in the year bears to 365.

• (3) For the purposes of sub-paragraph (2) above a van is to be treated as being incapable of use on any day if the day falls within a period, of 30 days or more, throughout which the van is incapable of being used at all.

• (4) For the purposes of sub-paragraph (2) above an excluded day is a day on which the van falls within paragraph (a) or (b) of that sub-paragraph.

Limit of benefit

7

Where (apart from this paragraph) the figure found under paragraph 5 above for a participating employee for a year would exceed £500, the figure for the employee for the year shall be taken to be £500.

Alternative calculation

8

• (1) In a case where—

• (a) a figure is found under paragraph 5 or 7 above for a participating employee for a year, and

• (b) the employee makes a claim for this paragraph to be applied,

the figure found for the employee for the year shall be taken to be the alternative figure found under this paragraph.

• (2) The alternative figure is a figure found by—

• (a) taking for each van involved the number of relevant days;

• (b) aggregating the numbers found under paragraph (a) above where more than one van is involved;

• (c) multiplying the number found under paragraph (a) (or paragraphs (a) and (b)) above by £5.

• (3) For the purposes of sub-paragraph (2)(a) above a relevant day is a day which falls in the year and during which (or part of which) the employee, or a member of his family or household, makes private use of the van concerned while it is a shared van.

• (4) For the purposes of section 95 of the Taxes Management Act 1970 (incorrect return etc.) a claim under this paragraph shall be taken to be a claim for relief.

Reduction for payments for use

9

• (1) Where this Part of this Schedule applies and in the year concerned a participating employee is required, as a condition of the van or vans being available for his private use, to pay any amount of money (whether by way of deduction from his emoluments or otherwise) for that use, then—

• (a) if the figure found for the employee for the year under paragraph 5 or 7 or 8 above exceeds the relevant sum, the figure shall be taken to be a figure equal to the excess;

• (b) if the relevant sum exceeds or is equal to the figure found for the employee for the year under paragraph 5 or 7 or 8 above, the figure shall be taken to be nil.

• (2) For the purposes of this paragraph the relevant sum shall be found by—

• (a) taking for any van involved the amount paid by the employee, as a condition of it being available for his private use, in respect of the period when the van is a shared van in the year concerned, and

• (b) where more than one van is involved, aggregating the amounts found under paragraph (a) above.

• (3) Any reference in this paragraph to a van being available for the employee’s private use includes a reference to the van being available for the private use of others being members of his family or household.

Part III — GENERAL

Interaction of Parts I and II

10

• (1) This paragraph applies where—

• (a) a cash equivalent of the benefit of a van to an employee in a year is found under Part I of this Schedule, and

• (b) a cash equivalent of the benefit of the same van (or of vans including the same van) to the employee in the year is found under Part II of this Schedule.

• (2) Once the different cash equivalents are so found, the employee shall be charged to tax as if the van concerned were different vans, one having a cash equivalent found under Part I of this Schedule and the other having (or counting towards) a cash equivalent found under Part II of this Schedule.

Limit of cash equivalent

11

In a case where—

• (a) the cash equivalent of the benefit of vans to an employee in a year would (apart from this paragraph) total more than £500, and

• (b) no more than one of the vans is available to him for his private use, or the private use of others being members of his family or household, at any one time in the year,

the cash equivalent of the benefit of the vans to him in the year shall be £500.

Interpretation

12

For the purposes of this Schedule a van is available to an employee at a particular time if it is then made available, by reason of his employment and without any transfer of the property in it, either to him or to others being members of his family or household.

Apportionment of cash equivalent in case of joint loan etc.

5A

• (1) Where in any year there are two or more employees chargeable to tax in respect of the same loan—

• (a) the cash equivalent of the benefit of the loan (determined in accordance with this Schedule) shall be apportioned between them in a fair and reasonable manner, and

• (b) the portion allocated to each employee shall be treated as the cash equivalent of the benefit of the loan so far as he is concerned.

• (2) For the purposes of determining the cash equivalent in such a case, the references in paragraph 5 above to the employee shall be construed as references to all the chargeable employees.

13

This Part of this Schedule is subject to the provisions of Part IV below.

PART IV — . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

This Part of this Schedule applies in relation to the employee for any year for which he is, or, apart from paragraph 7, 8 or 9 above as they apply in relation to home loans, would be, liable to income tax at a rate higher than basic rate or to tax chargeable in respect of excess liability.

15

Where this Part of this Schedule applies in relation to the employee for any year, none of paragraphs 7, 8 and 9 above shall apply in his case in relation to any home loan in that year, except as provided by paragraph 17 below.

16

• (1) Where, by virtue only of paragraph 15 above, paragraph 7, 8 or 9 above does not apply in the case of the employee in relation to a home loan in any year, there shall be treated as interest eligible for relief under section 353 by virtue of section 355(1)(a) in that year—

• (a) in a case where, apart from paragraph 15 above, paragraph 7 would have applied in relation to the home loan, an amount equal to the cash equivalent of the benefit of that loan in that year, apart from paragraph 7, or

• (b) in a case where, apart from paragraph 15 above, paragraph 8 or 9 would have applied in relation to the home loan, an amount equal to the difference between—

• (i) the cash equivalent of the benefit of the home loan in that year, apart from paragraphs 8 and 9, and

• (ii) what the cash equivalent of the benefit of the home loan would have been in that year, apart from paragraph 15 above,

but subject to the following provisions of this paragraph.

• (2) In the application of section 353 by virtue of this paragraph—

• (a) the amount that falls to be treated as mentioned in sub-paragraph (1) above shall be taken to fall within paragraph (a) of subsection (1) of that section; and

• (b) subsections (2) and (3) of that section shall be disregarded in relation to that amount.

17

Paragraph 15 above shall not prevent paragraph 7, 8 or 9 applying in the case of the employee in any year if, apart from paragraph 15—

• (a) he would not have been charged for that year to income tax at any rate higher than basic rate in respect of any of his total income or to tax in respect of excess liability; and

• (b) the aggregate of the following amounts, that is to say—

• (i) the amount of income in respect of which, apart from any home loans, he would have been charged to income tax for that year at the basic rate,

• (ii) any income which is treated by virtue of section 683(1) or 684(1) as his income for that year for the purposes of excess liability, notwithstanding that he would not have been charged to tax otherwise than at the basic rate,

• (iii) the cash equivalents, apart from paragraphs 7, 8 and 9 above, of the benefit of any home loans in that year, and

• (iv) his nominal element (if any) for that year, reduced by an amount equal to the cash equivalents, apart from paragraph 15 above, of the benefit of any home loans in that year,

does not exceed the basic rate limit by more than the amount specified in section 161(1) for that year.

18

If, in the case of the employee, there is a home loan in any year and that is a year for which—

• (a) he is liable to income tax at a rate higher than basic rate or to tax chargeable in respect of excess liability (whether or not by virtue of this Part of this Schedule), but

• (b) he would not have been so liable apart from any home loans, and

• (c) there is in his case a nominal element,

then, in computing his liability to income tax for that year, the amount which falls to be treated as emoluments under section 160(1) in consequence of the operation of paragraph 15 above (or, if more than one, the aggregate of those amounts) shall be taken to be the highest part of the income charged to tax, and an amount equal to the nominal element shall be taken to be the lowest portion of that part.

PART V — . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

• (1) In this Schedule—

• “eligible for relief” shall be construed in accordance with sub-paragraph (2) below;

• “eligible loan” means—

• (a) any loan the interest on which is eligible for relief, other than a home loan; and

• (b) in a case where part of the interest on a loan is eligible for relief otherwise than by virtue of section 355(1)(a), 356(1) or 365, that proportion of the loan which that part of the interest bears to the whole of the interest;

and in determining for the purposes of this definition whether the whole or any part of the interest on a loan is so eligible for relief, it shall be assumed that interest at a uniform rate is paid on the loan, whether or not that is in fact the case;

• “excess liability” means liability to income tax over what it would be if all income tax not chargeable at the lower rateby virtue of section 1(2)(aa) were charged at the basic rate, or (so far as applicable in accordance with section 207A) the lower rate,, to the exclusion of any higher rate;

• “home loan” means—

• (a) any loan the interest on which is, or apart from section 357 would have been, eligible for relief by virtue of section 355(1)(a), 356(1) or 365; and

• (b) in a case where part of the interest on a loan is or would have been so eligible for relief, that proportion of the loan which that part of the interest bears to the whole of the interest;

and in determining for the purposes of this definition whether the whole or any part of the interest on a loan is or would have been so eligible for relief, it shall be assumed that interest at a uniform rate is paid on the loan, whether or not that is in fact the case;

• “loan”, except in Part I of this Schedule, shall be construed in accordance with sub-paragraphs (3) to (5) below;

• “nominal element”, in relation to the employee, means the amount (if any) which, apart from paragraph 15 above, would, by virtue of section 161(1), not have been charged to tax under section 160 in that year in his case.

• (2) Interest is “eligible for relief” for the purposes of this Schedule if it is eligible for relief under section 353 or would be eligible for such relief apart from subsection (2) of that section.

• (3) In the definitions of “eligible loan” and “home loan” in sub-paragraph (1) above, “loan” means any such loan as is mentioned in section 160(1), and for this purpose sub-paragraphs (4) and (5) below shall be disregarded.

• (4) Where by virtue of sub-paragraph (1) above part of a loan constitutes a home loan or an eligible loan, the loan shall be treated for the purposes of this Schedule, apart from Part I, as if it were two or more separate loans, consisting respectively—

• (a) of the part (if any) which is a home loan,

• (b) of the part (if any) which is an eligible loan, and

• (c) of the part (if any) which is neither a home loan nor an eligible loan,

and, subject to sub-paragraph (5) below, references in this Schedule, apart from Part I, to loans, home loans and eligible loans shall be construed accordingly.

• (5) Except for home loans and eligible loans, all the loans between the same lender and borrower for which a cash equivalent falls to be ascertained and which are outstanding at any time, as to any amount, in any year are to be treated for the purposes of this Schedule, apart from Part I, as a single loan.

SCHEDULE 7A

Introduction

1

For the purposes of section 161B(1) a loan “on ordinary commercial terms” means a loan—

• (a) made by a person (“the lender”) in the ordinary course of a business carried on by him which includes—

• (i) the lending of money, or

• (ii) the supplying of goods or services on credit, and

• (b) in relation to which the requirements of paragraph 2, 3 or 4 below are met.

Requirements relating to original loan

2

• (1) This paragraph applies to any loan and the relevant time for the purposes of this paragraph is the time the loan was made.

• (2) The requirements of this paragraph are—

• (a) that at the relevant time comparable loans were available to all those who might be expected to avail themselves of the services provided by the lender in the course of his business;

• (b) that a substantial proportion of the relevant loans were made to members of the public;

• (c) that the loan in question and comparable loans generally made by the lender at or about the relevant time to members of the public are held on the same terms; and

• (d) that if those terms differ from those applicable immediately after the relevant time they were imposed in the ordinary course of the lender’s business.

• (3) For the purposes of this paragraph a loan is comparable to another loan if it is made for the same or similar purposes and on the same terms and conditions.

• (4) The relevant loans for the purposes of sub-paragraph (2)(b) are—

• (a) the loan in question, and

• (b) comparable loans made by the lender at or about the relevant time.

• (5) In determining for the purposes of this paragraph whether any loans made by any person before 1st June 1994 are made on the same terms or conditions, or held on the same terms, there shall be left out of account any amounts, by way of fees, commission or other incidental expenses, incurred for the purpose of obtaining any of those loans by the persons to whom they are made.

Requirements relating to loan varied before 6th April 2000

3

• (1) This paragraph applies to a loan that has been varied before 6th April 2000 and the relevant time for the purposes of this paragraph is the time of the variation.

• (2) The requirements of this paragraph are—

• (a) that a substantial proportion of the relevant loans were made to members of the public;

• (b) that the loan in question and relevant loans generally made by the lender at or about the relevant time to members of the public are held on the same terms; and

• (c) that if those terms differ from those applicable immediately after the relevant time they were imposed in the ordinary course of the lender’s business.

• (3) The relevant loans for the purposes of sub-paragraph (2)(a) are—

• (a) the loan in question;

• (b) any existing loans which were varied at or about the time of the variation of the loan in question so as to be held on the same terms as that loan after it was varied;

• (c) any new loans made by the lender, at or about that time, which are held on those terms.

Requirements relating to loan varied on or after 6th April 2000

4

• (1) The requirements of this paragraph apply to a loan that has been varied on or after 6th April 2000 and the relevant time for the purposes of this paragraph is the time of the variation.

• (2) The first requirement is that at the relevant time members of the public that had loans from the lender for similar purposes had a right to vary their loans on the same terms and conditions as applied in relation to the variation of the loan in question.

• (3) The second requirement is that any existing loans so varied and the loan in question as varied are held on the same terms.

• (4) The third requirement is that if those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business.

• (5) The fourth requirement is that a substantial proportion of the relevant loans were made to members of the public.

• (6) The relevant loans for the purposes of sub-paragraph (5) are—

• (a) the loan in question;

• (b) any existing loans which were varied at or about the time of the variation of the loan in question so as to be held on the same terms as that loan after it was varied;

• (c) any new loans made by the lender, at or about that time, which are held on those terms.

Disregard of certain penalties, fees, etc.

5

Amounts incurred by the person to whom a loan is made—

• (a) on penalties or interest or similar amounts incurred as a result of varying the loan, and

• (b) on fees, commission or other incidental expenses, incurred for the purpose of obtaining the loan,

shall be left out of account in determining for the purposes of paragraph 3 or 4 whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms.

Meaning of 'member of the public’

6

For the purposes of this Schedule a “member of the public” means a member of the public at large with whom the lender deals at arm’s length.

13A

• (1) Where a scheme includes provision by virtue of paragraph 13(4) or (5) above the scheme must be so framed that in arriving at the profits for the base year or for the previous profit period any profit-related pay and any secondary Class I contributions in respect of it are accorded the same accountancy treatment as is accorded to any profit-related pay and any secondary Class I contributions in respect of it in arriving at the profits in the profit period.

• (2) In sub-paragraph (1) above—

• (a) “profit-related pay” means profit-related pay under whatever scheme;

• (b) “secondary Class I contributions” means secondary Class I contributions under Part I of the Social Security Act 1975 or Part I of the Social Security (Northern Ireland) Act 1975 or Part I of the Social Security Contributions and Benefits Act 1992 or Part I of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

• (3) Sub-paragraph (1) above shall apply notwithstanding anything in paragraph 19 below.

• (4) Where a scheme includes provision by virtue of paragraph 13(4) above the scheme must also include provision that if the pay for the profit period is less than the pay for the base year or for the previous profit period (as the case may be) the percentage to be applied for the purposes of the provision included by virtue of paragraph 13(4) above shall be the increased percentage (instead of any other percentage).

• (5) The increased percentage must be one arrived at by—

• (a) taking the percentage that would be applied for the purposes of the provision included by virtue of paragraph 13(4) above apart from the provision included by virtue of sub-paragraph (4) above, and

• (b) adding the percentage found by expressing the difference in pay as a percentage of the profits for the base year or for the previous profit period (as the case may be).

• (6) For the purposes of this paragraph—

• (a) the pay for the profit period or for the previous profit period or for the base year is the pay paid to employees in respect of employment in the period or year concerned in the employment unit concerned;

• (b) the difference in pay is the difference between the pay for the profit period and the pay for the previous profit period or for the base year (as the case may be);

and any profit-related pay shall be ignored in applying paragraph (a) above.

14A

• (1) Where a scheme includes provision to give effect to paragraph 14(3) above or provision by virtue of paragraph 14(4) above the scheme must be so framed that in arriving at the profits in the preceding period of 12 months any profit-related pay and any secondary Class I contributions in respect of it are accorded the same accountancy treatment as is accorded to any profit-related pay and any secondary Class I contributions in respect of it in arriving at the profits in the profit period.

• (2) Where a scheme includes provision by virtue of paragraph 14(5) above the scheme must be so framed that in arriving at the profits in the relevant period of 12 months any profit-related pay and any secondary Class I contributions in respect of it are accorded the same accountancy treatment as is accorded to any profit-related pay and any secondary Class I contributions in respect of it in arriving at the profits in the profit period; and for this purpose the relevant period of 12 months is the period of 12 months immediately preceding the first or only profit period to which the scheme relates.

• (3) In sub-paragraphs (1) and (2) above—