Income and Corporation Taxes Act 1988

• (9) Subsections (1) to (7) above shall apply in relation to . . . the trustees of a settlement, scheme administrators of registered pension schemes sub-scheme administrators of sub-schemes which form part of a split scheme pursuant to the Registered Pensions (Splitting of Schemes) Regulations 2006or personal representatives . . . as they apply in relation to an individual.

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

Repayment supplements: companies

825

• (1) This section applies to the following payments made to a company in connection with any accounting period for which the company was resident in the United Kingdom (“the relevant accounting period”), that is to say—

• (a) a repayment of corporation tax paid by the company for that accounting period (including advance corporation tax paid in respect of distributions made by the company in that accounting period . . . ); or

• (b) a repayment of income tax in respect of a payment received by the company in that accounting period on which the company bore income tax by deduction; . . .

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

• (2) Subject to the following provisions of this section, where a payment . . . to which this section applies is made by the Board or an inspector after the end of the 12 months beginning with the material date, the payment shall be increased under this section by an amount (a “repayment supplement”) equal to interest on the amount paid at the rate applicable under section 178 of the Finance Act 1989 for each complete tax month contained in the period (if any) beginning with the relevant date and ending at the end of the tax month in which the order for the payment is issued.

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

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

• (a) if the payment is a repayment of corporation tax that was paid on or after the first anniversary of the material date, the relevant date is the anniversary of the material date that occurs next after the date on which that tax was paid;

• (b) in any other case, the relevant date is the first anniversary of the material date;

and where a payment to which this section applies is a repayment of corporation tax paid by a company on different dates, the payment shall as far as possible be treated for the purposes of this subsection as a repayment of tax paid on a later rather than an earlier date among those dates.

• (4) For the purposes of this section—

• (a) a repayment of corporation tax made in consequence of a claim by a company under section 239(3) to have the whole or any part of an amount of surplus advance corporation tax arising in the case of any accounting period treated as if it were advance corporation tax paid in respect of distributions made by the company in any earlier accounting period shall be treated as a repayment of corporation tax paid for the accounting period in the case of which that amount of surplus advance corporation tax arose; and

• (b) a repayment of income tax or corporation tax made on a claim under subsection (4) of section 419 shall be treated as if it were a repayment of corporation tax paid for the accounting period in which the repayment of, or of the part in question of, the loan or advance mentioned in that subsection was made; and

• (c) a repayment of corporation tax or income tax falling to be made as a result of a claim under section 393A(1) to have the whole or any part of a loss incurred in an accounting period set off against profits of an earlier accounting period (“the earlier period”)—

• (i) shall, in a case where the earlier period falls wholly within the period of twelve months immediately preceding the accounting period in which the loss was incurred, be treated as a repayment of tax paid for the earlier period; and

• (ii) in any other case, shall be treated as a repayment of tax paid for the accounting period in which the loss is incurred; and

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

• (5) . . . The Treasury may by order from time to time increase or decrease the rate of interest by reference to which repayment supplements are calculated under subsection (2) above.

• (6) A repayment supplement shall not be payable under this section in respect of a payment made in consequence of an order or judgment of a court having power to allow interest on the payment.

• (7) A repayment supplement paid under this section shall be disregarded for all purposes of income tax and corporation tax.

• (8) In this section—

• “tax month” means the period beginning with the 6th day of any calendar month and ending with the 5th day of the following calendar month;

• “the material date” in relation to a payment to which this section applies, means the last date on which corporation tax on any of the profits of the company in question arising in the relevant accounting period could have been paid—in a case where section 10(1) applies, within the nine months there mentioned;in a case where section 478 applies, within the time limit imposed by subsection (2)(a) of that section, but subject to subsection (6) of that section.

• (9) This section has effect subject to section 826(8).

Interest on tax overpaid

826

• (1) In any case where—

• (a) a repayment falls to be made of corporation tax paid by a company for an accounting period which ends after the appointed day; or

• (aa) a repayment falls to be made under sections 246N and 246Q of advance corporation tax paid by a company in respect of distributions made by it in such an accounting period; or

• (b) a repayment of income tax falls to be made in respect of a payment received by a company in such an accounting period; or

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

• (d) a payment of R&D tax credit falls to be made to a company under Chapter 2 or 7 of Part 13 of CTA 2009 in respect of an accounting period; or

• (da) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (e) a payment of land remediation tax credit or life assurance company tax credit falls to be made to a company under Part 14 of CTA 2009 in respect of an accounting period; or

• (f) a payment of film tax credit falls to be made to a company, or

• (fa) a payment of television tax credit falls to be made to a company; or

• (fb) a payment of video game tax credit falls to be made to a company; or

• (fc) a payment of theatre tax credit falls to be made to a company; or

• (fd) a payment of orchestra tax credit falls to be made to a company; or

• (fe) a payment of museums and galleries exhibition tax credit falls to be made to a company; or

• (g) a payment of first-year tax credit falls to be made to a company under Schedule A1 to the Capital Allowances Act,

then, from the material date until the order for repayment or payment is issued, the repayment or payment shall carry interest at the rate which, under section 89 of the Management Act, is for the time being the prescribed rate for the purposes of this section.

• (2) Subject to section 826A(2), in relation to corporation tax paid by a company for an accounting period, the material date for the purposes of this section is the date on which corporation tax was paid or, if it is later, the date on which corporation tax for that accounting period became (or, as the case may be, would have become) due and payable in accordance with section 59D of the Management Act (payment of corporation tax).

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

• (3) In relation to a repayment of income tax falling within subsection (1)(b) above . . . , the material date is the day after the end of the accounting period in which the payment referred to in subsection (1)(b) above . . . was received by the company.

• (3A) In relation to a payment of R&D tax credit falling within subsection (1)(d) above the material date is whichever is the later of—

• (a) the filing date for the company’s company tax return for the accounting period for which the R&D tax credit is claimed, and

• (b) the date on which the company tax return or amended company tax return containing the claim for payment of the R&D tax credit is delivered to the Inland Revenue.

For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

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

• (3B) In relation to a payment of land remediation tax credit or life assurance company tax credit falling within subsection (1)(e) above the material date is whichever is the later of—

• (a) the filing date for the company’s company tax return for the accounting period for which the land remediation tax credit or the life assurance company tax credit is claimed, and

• (b) the date on which the company tax return or amended company tax return containing the claim for payment of the land remediation tax credit or the life assurance company tax credit is delivered to the Inland Revenue.

For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

• (3C) In relation to a payment of film tax credit , television tax credit , video game tax credit , theatre tax credit , orchestra tax credit or museums and galleries exhibition tax credit the material date is whichever is the later of—

• (a) the filing date for the company's company tax return for the accounting period for which the tax credit is payable, and

• (b) the date on which the company tax return or amended company tax return containing the claim for payment is delivered to an officer of Revenue and Customs.

For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

• (3D) In relation to a payment of first-year tax credit falling within subsection (1)(g) above the material date is whichever is the later of—

• (a) the filing date for the company's company tax return for the accounting period for which the tax credit is claimed, and

• (b) the date on which the company tax return or amended company tax return containing the claim for payment of the tax credit is delivered to the Commissioners for Her Majesty's Revenue and Customs.

For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

• (4) For the purposes of this section a repayment of tax made on a claim under section 458 of CTA 2010 shall be treated as if it were a repayment of corporation tax for the accounting period in which the event giving rise to entitlement to relief under that section occurred but, in relation to such a repayment of tax, the material date for the purposes of this section is—

• (a) the date when the entitlement to relief in respect of the repayment accrued, that is to say—

• (i) where the repayment , or the release or writing off, of the loan or advance (or part thereof) occurred on or after the day mentioned in section 458(4) of CTA 2010, the date nine months after the end of that accounting period; and

• (ii) in any other case, the date nine months after the end of the accounting period in which the loan or advance was made;

or

• (b) if it is later, the date on which the tax which is to be repaid was in fact paid.

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

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

• (6) Where a repayment of corporation tax is a repayment of tax paid by a company on different dates, the repayment shall so far as possible be treated for the purposes of this section as a repayment of tax paid on a later rather than an earlier date among those dates.

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

• (7A) In any case where—

• (a) a company carrying on a trade incurs a loss in the trade in an accounting period (“the later period”),

• (b) as a result of a claim under section 37 of CTA 2010, the whole or any part of that loss is relieved(whether under section 37 or 42 of that Act) for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period (“the earlier period”) which does not fall wholly within the period of twelve months immediately preceding the later period, and

• (c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of that repayment as falls to be made as a result of the claim under section 37 of CTA 2010, except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below.

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

• (7AA) In any case where—

• (a) a company ceases to carry on a trade in an accounting period (“the terminal period”),

• (b) as a result of a claim under section 45F of CTA 2010, the whole or any part of a loss made in the trade is relieved for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period (“the earlier period”) which does not fall wholly within the period of 12 months immediately preceding the terminal period, and

• (c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of that repayment as falls to be made as a result of the claim under section 45F, except so far as concerns interest for any time after the date on which any corporation tax for the terminal period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below).

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

• (7BB) Subject to subsection (7BC) below, in any case where—

• (a) within the meaning of section 806D, any relievable underlying tax or relievable withholding tax arises in an accounting period of a company (“the later period”),

• (b) pursuant to a claim under section 806G, the whole or any part of that tax is treated as mentioned in section 806D(4)(c) or (5)(c) in relation to the single related dividend or the single unrelated dividend arising in an earlier accounting period (“the earlier period”), and

• (c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 806G, except so far as concerns interest for any time after the date on which any corporation tax for the later period became due and payable (as mentioned in subsection (7D) below).

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

• (7C) In a case where—

• (a) there is for an accounting period of a company (“the later period”) a non-trading deficit on the company’s loan relationships,

• (b) as a result of a claim under section 389(1) or 459(1)(b) of CTA 2009 the whole or part of the deficit for the later period is set off against profits of an earlier accounting period (“the earlier period”), and

• (c) a repayment falls to be made of corporation tax for the earlier period or of income tax in respect of a payment received by the company in that accounting period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 389(1) or 459(1)(b) of CTA 2009 except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below.

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

• (7D) In subsections (7), (7A), (7AA), (7B) , (7BB) and (7C) above, any reference to the date on which corporation tax for an accounting period became, or would have become, due and payable shall be construed on the basis that corporation tax for an accounting period becomes due and payable on the day following the expiry of nine months from the end of the accounting period.

• (7E) The power conferred by section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) does not include power to make provision in relation to subsection (7), (7A), (7AA) (7B), (7BB), (7C) or (7D) above the effect of which would be to change the meaning of references in subsection (7), (7A), (7AA) (7B) , (7BB) or (7C) above to the date on which corporation tax for an accounting period became, or would have become, due and payable (as mentioned in subsection (7D) above).

• (8) In consequence of the preceding provisions of this section, no repayment supplement (within the meaning of section 825) shall be paid in respect of any repayment of tax or payment of tax credit where the relevant accounting period (within the meaning of that section) ends after the appointed day.

• (8A) Where—

• (a) interest has been paid to a company under subsection (1)(a) , (d), (e) (f), (fa), (fb) , (fc) , (fd) or (fe) above,

• (b) there is—

• (i) a change in the company’s assessed liability to corporation tax, or

• (ii) a change in the amount of the R&D tax credit . . . , land remediation tax credit or life assurance company tax creditor film tax creditor television tax credit or video game tax creditor theatre tax creditor orchestra tax creditor museums and galleries exhibition tax creditor first-year tax credit under Schedule A1 to the Capital Allowances Act payable to the company (which does not result in a change falling within sub-paragraph (i)),

other than a change which in whole or in part corrects an error made by the Board or an officer of the Board, and

• (c) as a result only of that change (and, in particular, not as a result of any error in the calculation of the interest), it appears to an officer of the Board that the interest ought not to have been paid, either at all or to any extent,

the interest that ought not to have been paid may be recovered from the company as if it were interest charged under Part IX of the Management Act (interest on overdue tax).

• (8B) For the purposes of subsection (8A) above, the cases where there is a change in a company’s assessed liability to corporation tax are those cases where—

• (a) an assessment, or an amendment of an assessment, of the amount of corporation tax payable by the company for the accounting period in question is made, or

• (b) a determination of that amount is made under paragraph 36 or 37 of Schedule 18 to the Finance Act 1998 (which until superseded by a self-assessment under that Schedule has effect as if it were one),

whether or not any previous assessment or determination has been made.

• (8BA) For the purposes of subsection (8A)(b) above, the cases where there is a change in the amount of the R&D tax credit . . . , the land remediation tax credit or the life assurance company tax creditor film tax creditor television tax credit or video game tax creditor theatre tax creditor orchestra tax creditor museums and galleries exhibition tax creditor first-year tax credit under Schedule A1 to the Capital Allowances Act payable to the company are those cases where an assessment, or an amendment to an assessment, is made to recover an amount of R&D tax credit . . . , land remediation tax credit or life assurance company tax creditor film tax creditor television tax credit or video game tax creditor theatre tax creditor orchestra tax creditor museums and galleries exhibition tax creditor first-year tax credit under Schedule A1 to the Capital Allowances Act paid to the company for the accounting period in question.

• (8C) In subsection (8A)(b) above “error” includes—

• (a) any computational error; and

• (b) the allowance of a claim or election which ought not to have been allowed.

• (9) In this section “the appointed day” means such day or days, not being earlier than 31st March 1992, as the Treasury may by order appoint for the purposes of this section.

VAT penalties etc

827

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

Orders and regulations made by the Treasury or the Board

828

• (1) . . . Any power of the Treasury or the Board to make any order or regulations under this Act . . . shall be exercisable by statutory instrument.

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

• (3) Subject to subsection (4) below and to any other provision to the contrary, any statutory instrument containing any order or regulations made by the Treasury or the Board . . . shall be subject to annulment in pursuance of a resolution of the House of Commons.

• (4) Subsection (3) above shall not apply in relation to an order or regulations made under section . . . . . . . . . . . . . . . . . . . . . 590C(6). . . . . . . . . or paragraph 7 of Schedule 14 . . . or—

• (a) if any other Parliamentary procedure is expressly provided;

• (b) if the order in question is an order appointing a day for the purposes of any provision of the Tax Acts, being a day as from which the provision will have effect, with or without amendments, or will cease to have effect.

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

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

Application of Income Tax Acts to public departments and avoidance of exempting provisions

829

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

Territorial sea and designated areas

830

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

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

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

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

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

Interpretation

Interpretation of this Act

831

• (1) In this Act, except so far as the context otherwise requires—

• (a) “the Corporation Tax Acts” means the enactments relating to the taxation of the income and chargeable gains of companies and of company distributions (including provisions relating also to income tax); and

• (b) “the Income Tax Acts” means the enactments relating to income tax, including any provisions of the Corporation Tax Acts which relate to income tax.

• (2) In this Act “the Tax Acts”, except so far as the context otherwise requires, means this Act and all other provisions of the Income Tax Acts and the Corporation Tax Acts.

• (3) In this Act—

• “CTA 2009” means the Corporation Tax Act 2009;

• “CTA 2010” means the Corporation Tax Act 2010;

• “ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;

• “ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005;

• “ITA 2007” means the Income Tax Act 2007;

• “the Management Act” means the Taxes Management Act 1970;

• “TIOPA 2010” means the Taxation (International and Other Provisions) Act 2010;

• “the 1968 Act” means the Capital Allowances Act 1968;

• “the 1970 Act” means the Income and Corporation Taxes Act 1970; and

• “the 1979 Act” means the Capital Gains Tax Act 1979.

• “the 1990 Act” means the Capital Allowances Act 1990.

• “the 1992 Act” means the Taxation of Chargeable Gains Act 1992.

• (4) Section 1 of the Family Law Reform Act 1987, the paragraph inserted in Schedule 1 to the Interpretation Act 1978 by paragraph 73 of Schedule 2 to that Act and section 1(3) of the Law Reform (Parent and Child) (Scotland) Act 1986 (legal equality of illegitimate children) shall be disregarded in construing references in this Act to a child or to children (however expressed).

• (5) This Act, so far as it relates to capital gains tax, shall be construed as one with the 1992 Act.

• (6) Any reference in this Act to a section, Part or Schedule is a reference to that section, Part or Schedule of or to this Act, unless the context otherwise requires.

Interpretation of the Tax Acts

832

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

Interpretation of Income Tax Acts

833

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

Interpretation of the Corporation Tax Acts

834

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

“Total income” in the Income Tax Acts

835

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

Returns of total income

836

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

“Annual value” of land

837

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

Subsidiaries

838

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

Connected persons

839

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

Meaning of “control” in certain contexts

840

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

Recognised stock exchange and recognised investment exchanges

841

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

Investment trusts

842

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

Commencement, savings, repeals etc.

Commencement

843

• (1) Except as otherwise provided by the following provisions of this section, this Act shall come into force in relation to tax for the year 1988-89 and subsequent years of assessment, and for companies’ accounting periods ending after 5th April 1988.

• (2) Except as otherwise provided by the following provisions of this section, such of the provisions of this Act as relate to capital gains tax (including the provisions of Part XVIII as applied to capital gains tax by section 277 of the 1992 Act) shall come into force in relation to that tax for the year 1988-89 and subsequent years of assessment.

• (3) The following provisions of this Act, that is to say—

• (a) so much of any provision as authorises the making of any Order in Council or regulations or other instrument;

• (b) so much of any provision as relates to the making of a return, the furnishing of a certificate or the giving of any other information, including any such provision which imposes a duty on the Board or an officer of the Board as well as any such provision which imposes a duty on any other person;

• (c) so much of any provision as imposes any penalty;

• (d) except where the tax concerned is all tax for years of assessment before the year 1988-89 or accounting periods ending before 6th April 1988, so much of any other provision as confers any power or imposes any duty the exercise or performance of which operates or may operate in relation to tax for more than one chargeable period,

shall come into force for all purposes on 6th April 1988 to the exclusion of the corresponding enactments repealed by this Act.

• (4) This section has effect except as otherwise provided by any other provision of this Act, and in particular except as provided by sections 96, 380 to 384, 393, . . ., 400, 703 . . . .

Savings, transitional provisions, consequential amendments and repeals

844

• (1) Schedule 29, which makes amendments to other enactments consequential on the passing of this Act, shall have effect.

• (2) Schedule 29, section 843 and this section are without prejudice to the provisions of the Interpretation Act 1978 as respects the effect of repeals.

• (3) Schedule 30 which contains savings and transitional provisions shall have effect.

• (4) The enactments mentioned in Schedule 31 are hereby repealed to the extent specified in the third column of that Schedule.

• (5) Subject to subsection (6) below, section 843(3), Schedule 30 and to any other provision of this Act by which any provision is brought into force to the exclusion of the corresponding enactments repealed by this Act, those repeals shall come into force in accordance with subsections (1) and (2) of section 843.

• (6) No provision mentioned in subsection (5) above shall be taken as bringing a repeal into force except to the extent that the repealed enactment is being superseded.

Short title

845

This Act may be cited as the Income and Corporation Taxes Act 1988.

SCHEDULE 1

Expenditure before 1964-65: deductions from rents

1

• (1) Except as provided by sub-paragraphs (2) and (3) below, no payment shall be deductible under sections 25 and 26 if made before the beginning of the year 1964-65.

• (2) Where, by virtue of paragraph 1(2) of Schedule 2 to the 1970 Act, any amount fell to be treated as a payment in relation to premises made by a person in the year 1964-65 in respect of dilapidation attributable to that year, the amount shall be similarly treated for the purposes of sections 25 and 26.

• (3) If the amount of any loss was treated, by virtue of paragraph 1(3) of that Schedule, as if it were a payment such as is mentioned in section 72(1) of the 1970 Act made by any person in respect of any premises in and in respect of any year, it shall be treated for the purposes of sections 25 and 26 as if it were a payment such as is mentioned in section 25(1) made by that person in respect of those premises in and in respect of that year.

• (4) A deduction falling to be made by virtue of sub-paragraph (3) above shall be made notwithstanding anything in sections 392(3) and 396(1); and relief shall not be given under either of those sections in respect of the loss in so far as a deduction in respect of it is given under this paragraph.

Expenditure before 1964-65: deductions from other receipts

2

• (1) Subject to sub-paragraph (2) below, no payment shall be deductible under section 28 if made before the beginning of the year 1964-65.

• (2) Sub-paragraph (1) above shall not prevent the deduction of a payment in so far as a loss in respect thereof was carried forward to the year 1964-65 by virtue of section 346 of the Income Tax Act 1952 (Case VI losses).

• (3) Paragraph 1(4) above shall apply in the case of a deduction falling to made by virtue of sub-paragraph (2) above as it applies in the case of one falling to be made by virtue of paragraph 1(3) above.

Expenditure on sea walls before 1964-65

3

• (1) Section 30 shall not apply in relation to expenditure incurred before the beginning of the year 1964-65 except in accordance with sub-paragraphs (2) and (3) below.

• (2) Subject to sub-paragraph (3) below, section 30 shall apply in relation to expenditure which, by virtue of paragraph 3(1) of Schedule 2 to the 1970 Act, was treated as if—

• (a) it had been incurred in the year of assessment following that in which it was actually incurred, and

• (b) in so far as it was incurred in repairing an embankment, it had been incurred in making it,

as if it had been incurred in that year and in making that embankment.

• (3) If, by virtue of the proviso to paragraph 3(1) of Schedule 2 to the 1970 Act, any expenditure fell to be treated for the purposes of sections 71 to 77 of that Act as if it were an amount paid by any person in and in respect of the year 1964-65 in respect of the maintenance of premises preserved or protected by an embankment, it shall be similarly treated for the purposes of sections 25 to 31.

SCHEDULE 2

1

A claim for relief under this Schedule shall be made to the Board if the claimant is not resident in the United Kingdom.

2

The relief shall be computed in accordance with paragraphs 3 to 6 below, and in those paragraphs—

• “chargeable sum” means an amount to which under section 34(1), (2), (3), (4) or (5), the claimant is treated as becoming entitled in the year of assessment, or in respect of which he is by virtue of section 34(6) or (7) or 35 or 36, chargeable to income tax for the year under Case VI of Schedule D;

• “relevant period”, in relation to any chargeable sum, means the period treated in computing the amount of the sum as being the duration of the lease in respect of which it arises or where it arises (by virtue of section 36) in connection with the sale of an estate or interest in land, means the period mentioned in subsection (1) of that section;

• “yearly equivalent”, in relation to any chargeable sum, means the amount which bears to that sum the same proportion as one bears to the number of years and fractions of years in the relevant period.

3

There shall be computed—

• (a) the amount of the tax which, in respect of the chargeable sum or the aggregate of the chargeable sums, as the case may be, would be chargeable if—

• (i) the relief were not given, and

• (ii) that sum or aggregate were treated as the highest part of the claimant’s total income, and

• (iii) amounts deductible in computing the tax were so far as possible deducted from other sums from which they are deductible in the year rather than from that sum or aggregate, and

• (b) the amount of the tax which, in respect of that sum or aggregate, would be chargeable if calculated in accordance with paragraph 4 below by reference to the yearly equivalent of that sum or, as the case may be, of each sum comprised in that aggregate,

and the relief shall consist of a reduction or repayment of tax equal to the difference between those amounts.

4

• (1) Where the relief is to be given in respect of one chargeable sum only, the tax shall be calculated for the purposes of paragraph 3(b) above as follows—

• (a) from the yearly equivalent of that sum there shall be deducted such amounts as, following the principle set out in paragraph 3(a)(iii) above, are deductible from that sum;

• (b) if any balance of the yearly equivalent remains, the tax in respect of the chargeable sum shall be calculated at the rate which, apart from the relief, would apply if the amount of the sum were reduced to the amount of that balance and were then treated as the highest part of the claimant’s total income or, if two or more rates would then apply, at those rates in corresponding proportions;

• (c) if no such balance remains, the tax shall be calculated at the rate applicable to the highest part of the remainder of the claimant’s total income for the year of assessment,

and, whether or not any such balance remains, the tax shall be arrived at by applying that rate, or those rates, to so much of the chargeable sum as remains after deducting such amounts as, following the principle set out in paragraph 3(a)(iii) above, are deductible from that sum.

• (2) Where the relief is to be given in respect of two or more chargeable sums, the tax for each shall be calculated for the purposes of paragraph 3(b) above as provided by sub-paragraph (1) above, but so that—

• (a) the rate of tax on a sum arising in respect of any relevant period shall be calculated before the rate of tax on any sum arising in respect of a shorter relevant period, and

• (b) in calculating the rate of tax on a sum arising in respect of any relevant period and the deductions from that sum, an amount deducted in respect of a sum tax for which has already been calculated shall not again be deducted, and in calculating a rate of tax—

• (i) any chargeable sum tax for which has not already been calculated, or in respect of which no balance of the yearly equivalent remains, shall be disregarded, and

• (ii) as respects any other chargeable sum, the total income of the claimant shall be taken to include the sum, but on the assumption that the amount of it was only that of the balance remaining of the yearly equivalent.

• (3) Where two or more chargeable sums arise in respect of relevant periods of equal duration they shall be treated for the purposes of this paragraph as a single chargeable sum of an amount equal to the aggregate of those sums and arising in respect of a relevant period of like duration.

5

A provision of paragraph 3 or 4 above requiring tax to be calculated as if an amount were treated as the highest part of the claimant’s total income shall apply notwithstanding any provision of the Income Tax Acts directing other income to be treated as the highest part of his total income, but for the purposes of those paragraphs his total income shall be deemed—

• (a) not to include any amount in respect of which he is chargeable to tax under section 148, and

• (b) to include, in respect of any amount which would otherwise be included therein by virtue of section 547(1)(a), no greater amount than the appropriate fraction thereof within the meaning of section 550.

6

A provision of paragraph 3 or 4 above shall apply in relation to any part of the claimant’s total income (as computed for the purposes of that provision) as respects which he would be entitled under Chapter I of Part VII to a deduction equal to that part as if that part were subject to a nil rate of tax.

SCHEDULE 3

PART I — PUBLIC REVENUE DIVIDENDS ETC. PAYABLE TO THE BANK OF ENGLAND OR THE BANK OF IRELAND OR ENTRUSTED FOR PAYMENT TO THE BANK OF ENGLAND, THE BANK OF IRELAND OR THE NATIONAL DEBT COMMISSIONERS

1

The Bank of England and the Bank of Ireland as respects the dividends and the profits attached thereto payable to them out of the public revenue of the United Kingdom, or payable out of any public revenue and entrusted to them for payment and distribution, and the National Debt Commissioners, as respects the dividends payable by them or of which they have the distribution, shall, when any payment becomes due, deliver to the Board true accounts, in books provided for the purpose, of—

• (a) the amounts of the dividends and profits attached thereto payable to the Bank, and

• (b) all dividends entrusted to the Bank or the National Debt Commissioners for payment to the persons entitled thereto, and

• (c) the amount of income tax chargeable thereon at the lower rate in force at the time of payment, without any other deduction than is allowed by the Income Tax Acts.

2

• (1) In the case of dividends and profits attached thereto payable to the Bank of England out of the public revenue of the United Kingdom, the Bank of England shall set apart the income tax in respect of the amount payable to them.

• (2) In the case of dividends and profits attached thereto entrusted to the Bank of England for payment and distribution, dividends payable by the Bank of Ireland at its principal office in Belfast, and dividends payable by the National Debt Commissioners or of which the National Debt Commissioners have the distribution—

• (a) the Bank of England, the Bank of Ireland and the National Debt Commissioners respectively shall, before any payment is made by them, retain the amount of the income tax for the purposes of the Income Tax Acts, and

• (b) the retaining of the amount shall be deemed to be a payment of the income tax by the persons entitled to the dividends, and shall be allowed by them on the receipt of the residue thereof, and

• (c) the Bank of England, the Bank of Ireland and the National Debt Commissioners respectively shall be acquitted and discharged of a sum equal to the amount retained as though that sum had been actually paid.

• (3) In relation to dividends payable to the Bank of Ireland out of the public revenue of the United Kingdom, and public revenue dividends which are entrusted to the Bank of Ireland for payment and distribution and are not payable by that Bank out of its principal office in Belfast, the following provisions shall have effect—

• (a) the money which, apart from this sub-paragraph, would be issuable to the Bank of Ireland under section 14 of the National Debt Act 1870, or otherwise payable to the Bank of Ireland for the purpose of dividends on securities of the United Kingdom government entered in the register of the Bank of Ireland in Dublin, shall be issued and paid to the Bank of England; and

• (b) the Bank of England shall set apart and retain out of moneys so issued and paid to them the amount of the income tax on the dividends payable to the Bank of Ireland, and on the dividends on the securities of the United Kingdom government entered in the register of the Bank of Ireland in Dublin; and

• (c) the Bank of England shall pay to the Bank of Ireland the residue of moneys so issued and paid to them, to be applied by the Bank of Ireland to the payment of the dividends; and

• (d) the retaining of the amount shall be deemed to be a payment of the income tax by the persons entitled to the dividends, and shall be allowed by them on the receipt of the residue thereof, and the Bank of England and the Bank of Ireland shall be acquitted and discharged of a sum equal to the amount retained as though that sum had been actually paid.

3

Money set apart or retained under paragraph 2 above, and the amount of any tax charged on the trading profits of the Bank of England or the Bank of Ireland, shall be paid into the general account of the Board at the Bank of England or the Bank of Ireland.

4

No deduction of income tax under this Part of this Schedule shall be made from any dividends payable in respect of stock, securities or annuities standing in the name of the official custodian for charities, nor from any dividends in respect of which there is given to the Bank of England a certificate from the Charity Commissioners that the dividends are subject only to charitable trusts and are exempt from tax.

PART II — PUBLIC REVENUE DIVIDENDS PAYABLE BY PUBLIC OFFICES AND DEPARTMENTS

5

Where any payment is made of public revenue dividends payable by any public office or department of the Crown, the appropriate officer shall retain the income tax charged and pay the same into the general account of the Board at the Bank of England or the Bank of Ireland.

PART III — OTHER PUBLIC REVENUE DIVIDENDS, FOREIGN DIVIDENDS AND PROCEEDS OF COUPONS

6

• (1) The following persons are chargeable persons for the purposes of this Part of this Schedule—

• (a) every person (other than the National Debt Commissioners or the Bank of England or the Bank of Ireland) who is entrusted with the payment of any dividends which are payable out of the public revenue of Northern Ireland, or which are payable to any persons in the United Kingdom out of any public revenue other than that of the United Kingdom or Northern Ireland;

• (b) every person in the United Kingdom who is entrusted with the payment of any foreign dividends;

• (c) every banker or other person in the United Kingdom who obtains payment of any dividends in such circumstances that the dividends are chargeable to tax under Schedule C, or in the case of foreign dividends, under Schedule D; and

• (d) every banker in the United Kingdom who sells or otherwise realises coupons, and every dealer in coupons in the United Kingdom who purchases coupons, in such manner that the proceeds of the sale or realisation are chargeable to tax under Schedule C, or in the case of foreign dividends, under Schedule D.

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

7

8

9

10

11

Nothing in paragraphs 6 to 6F above shall impose on any banker the obligation to disclose any particulars relating to the affairs of any person on whose behalf he may be acting.

12

Where income tax in respect of the proceeds of the sale or realisation of any coupon has been accounted for under this Part of this Schedule by any banker or dealer, and the coupon has been subsequently paid in such manner that income tax has been deducted from the payment under any of the provisions of this Schedule, the tax so deducted shall be repaid.

13

• (1) . . . ,the Board may, by notice served on any chargeable person, require that person within such time as may be specified in the notice to make available at his premises for inspection by an officer authorised by the Board all such books and other documents in the possession or control of that person as the officer may reasonably require for the purpose of determining whether any return made by that person under paragraph 6C above is correct and complete.

• (2) The Board may grant a certificate exempting any chargeable person from the provisions of sub-paragraph (1) above, and while the certificate is in force the powers conferred by that sub-paragraph shall not be exercisable in relation to that person; and any such certificate may be revoked at any time by the Board, and may contain such terms and conditions as they think proper.

14

In this Part of this Schedule—

• “dividends” includes foreign dividends, and

• “foreign dividends” has the meaning given by section 123.

PART IV — INTEREST PAYABLE OUT OF THE PUBLIC REVENUE OF THE REPUBLIC OF IRELAND ETC.

15

• (1) Any person who is entrusted with the payment of any interest, dividends or other annual payments which are payable to any persons in the United Kingdom out of the public revenue of the Republic of Ireland, or out of or in respect of the stocks, funds, shares or securities of any Republic of Ireland company, society, adventure or concern, shall be relieved from the obligation imposed on him under the preceding provisions of this Schedule to pay income tax thereon on behalf of the persons entitled thereto as regards any such interest, dividends or other annual payments in respect of which he furnishes to the Board, in such form and subject to such conditions as they may prescribe, a list containing—

• (a) a full description of the interest, dividends or other annual payments, and

• (b) the name and address of each person who is entitled thereto, and

• (c) the amount thereof to which each such person is entitled.

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

• (3) Any interest, dividends or other annual payments in respect of which the person entrusted with payment is relieved from the obligation to pay income tax by virtue of sub-paragraph (1) above, shall be assessable and chargeable under Case IV or V of Schedule D, as the case may be.

• (4) The Board may make such regulations as may be necessary for the purposes of this paragraph.

• (5) This paragraph shall apply to—

• (a) any banker or other person in the United Kingdom who obtains payment of any such interest, dividends or other annual payments as is or are mentioned in sub-paragraph (1) above; and

• (b) to any person who would, apart from this paragraph, be obliged to pay income tax in respect of the proceeds of the sale or other realisation of any coupon for any such interest, dividends or other annual payments,

as it applies to any person entrusted with the payment of any such interest, dividends or other annual payments, with the substitution in a case falling within paragraph (b) above, of references to the proceeds of the sale or other realisation for references to such interest, dividends or other annual payments.

SCHEDULE 4

Interpretation

1

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

Charge to tax after acquisition of certain securities

2

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

3

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

Charge to tax on disposal of securities

4

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

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

5

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

6

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

Disposals

7

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

8

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

Securities issued and owned by associated companies or group companies

9

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

Close companies

10

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

Early redemption

11

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

Identification of securities disposed of

12

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

Information

13

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

Charities

14

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

SCHEDULE 5

Farming: the general rule

1

• (1) Subject to the provisions of this Schedule, in computing profitschargeable to corporation tax under Case I of Schedule D, animals kept by a farmer for the purposes of its farming shall be treated as trading stock.

• (2) Animals forming part of production herds with respect to which an election under paragraph 2 below has effect shall not be so treated, but shall be treated instead in accordance with the rules set out in paragraph 3 below.

• (3) An election under paragraph 2 below is referred to in this Schedule as “an election for the herd basis”.

Farming: election for the herd basis

2

• (1) An election for the herd basis shall apply to all production herds of a particular class kept by the farmer making the election, including herds which the farmer has ceased to keep before, or first begins to keep after, the making of the election.

• (2) An election for the herd basis must be made in writing to the inspector, and must specify the class of herds to which it relates.

• (3) Subject to paragraphs 6 and 12 below, an election for the herd basis made by any farmer shall be valid only if it is made —

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) in the case of an election on behalf of persons in partnership, not later than twelve months from the 31st January next following the year of assessment in which the qualifying period of account ends; and

• (c) in the case of an election by a person chargeable to corporation tax, not later than two years from the end of the qualifying accounting period.

• (4) An election for the herd basis made by any farmer shall be irrevocable and, subject to paragraph 6 below, shall have effect—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) in a case falling within sub-paragraph (3)(b) above, for the qualifying period of account and all subsequent periods of account; and

• (c) in a case falling within sub-paragraph (3)(c) above, for the qualifying accounting period and all subsequent accounting periods.

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

• (6) In this paragraph—

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “qualifying accounting period”, in relation to a person chargeable to corporation tax, means the first accounting period during the whole or part of which it kept a production herd of the class in question;

• “qualifying period of account”, in relation to persons in partnership, means the first period of account during the whole or part of which those persons kept such a herd;

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

• (1) Where an election for the herd basis has effect, the consequences for the purposes of computing profitschargeable to corporation tax under Case I of Schedule D shall be as provided by this paragraph.

• (2) The initial cost of the herd and, subject to the provisions of this paragraph as to replacements, the cost of any animal added to the herd shall not be deducted as an expense and the value of the herd shall not be brought into account.

• (3) Where an animal which has theretofore been treated as part of the farmer’s trading stock is added to the herd otherwise than by way of replacement, there shall be included as a trading receipt—

• (a) in the case of an animal bred by the farmer, a sum equal to the cost of breeding it and rearing it to maturity; and

• (b) in any other case, a sum equal to the initial cost to the farmer of acquiring the animal, together with any cost incurred by the farmer in rearing it to maturity.

• (4) Where an animal (the “first animal”) forming part of the herd dies, or ceases to form part of the herd, and is replaced in the herd by another animal (the “second animal”)—

• (a) any proceeds of sale of the first animal shall be included as a trading receipt; and

• (b) the cost of the second animal, except in so far as that cost consists of such costs as are allowable apart from the provisions of this Schedule as deductions in computing profits of farming under Case I of Schedule D, shall, subject to sub-paragraphs (5) and (6) below, be deducted as an expense.

• (5) Where the second animal is of better quality than the first animal, the amount deducted shall not exceed the amount which it would have been necessary to expend in order to acquire an animal of the same quality as the first animal.

• (6) Where the first animal was slaughtered by the order of any Ministry, government department or local or public authority under the law relating to diseases of animals, and the second animal is of worse quality, the amount included as a trading receipt shall not exceed the amount allowable as a deduction.

• (7) Where the herd is sold as a whole, and another production herd of the same class is acquired, sub-paragraphs (1) to (6) above shall apply as though there had been sold from, and replaced in, the original herd a number of animals equal to the number in the original herd or in the newly acquired herd, whichever is the less.

• (8) Subject to sub-paragraph (9) below, if (either all at once or over a period not exceeding 12 months) either—

• (a) the whole of a herd is sold in circumstances in which sub-paragraph (7) above does not apply, or

• (b) a part of a herd is sold on a substantial reduction being made in the number of animals in the herd,

any profit or loss arising from the transaction shall not be taken into account.

• (9) Where within five years of the sale the seller acquires or begins to acquire another production herd of the class in question or, as the case may be, acquires or begins to acquire animals to replace the part of the herd in question—

• (a) sub-paragraphs (4) to (7) above shall apply to the acquisition or replacement, except that, if the sale was one which the seller was compelled to effect by causes wholly beyond the seller's control, the amount included as a trading receipt in respect of any animal sold which is replaced by an animal of worse quality shall not exceed the amount allowable as a deduction in respect of that animal of worse quality; and

• (b) for the purpose of the application of those sub-paragraphs, the proceeds of sale of the animals comprised in the original herd or part of a herd shall be brought into account as if they had been respectively received at the times of the corresponding acquisitions.

• (10) If an animal forming part of the herd is sold, and none of sub-paragraphs (4) to (9) above applies, any profit or loss arising from the transaction shall be included or deducted, as the case may be; and for the purposes of this sub-paragraph, that profit or loss shall be computed by comparing with the proceeds of sale—

• (a) in the case of an animal bred by the farmer, the cost of breeding it and rearing it to maturity; and

• (b) in any other case, a sum equal to the initial cost to the farmer of acquiring the animal (or in the case of an animal acquired otherwise than for valuable consideration, its market value when the farmer acquired it) together, in both cases, with any cost incurred by the farmer in rearing it to maturity.

• (11) Where the herd is sold as a whole, and another production herd of the same class is acquired, and the number of animals in the newly acquired herd is less than the number in the original herd, then, if the difference is not substantial, sub-paragraphs (8) and (9) above shall not apply, and sub-paragraph (10) above shall apply to a number of animals in the original herd equal to the difference.

• (12) The preceding provisions of this paragraph shall apply in relation to the death or destruction of animals as they apply in relation to their sale, as if any insurance or compensation moneys received by reason of the death or destruction were proceeds of sale, and any reference in this paragraph to the proceeds of sale of an animal includes a reference to any proceeds of sale of its carcase or any part of its carcase.

Farming: provisions applicable to special cases

4

A farmer who, having kept a production herd of a particular class, ceases altogether to keep herds of that class for a period of at least five years shall, as respects production herds kept by the farmer after the end of that period, be treated as if the farmer had never kept any production herds of that class before the end of that period.

5

• (1) Where a farmer transfers to another person all or any of the animals which form part of a production herd otherwise than by way of sale or by way of sale but for a price other than that which they would have fetched if sold in the open market, and either—

• (a) the transferor is a body of persons over whom the transferee has control or the transferee is a body of persons over whom the transferor has control or both the transferor and the transferee are bodies of persons and some other person has control over both of them; or

• (b) it appears with respect to the transfer, or with respect to transactions of which the transfer is one that the sole or main benefit, or one of the main benefits, which (apart from the provisions of this paragraph) might have been expected to accrue to the parties or any of them was a benefit resulting from—

• (i) the obtaining of a right to make an election for the herd basis, or

• (ii) such an election having effect or ceasing to have effect, or

• (iii) such an election having a greater effect or a less effect;

the like consequences shall ensue, in relation to all persons concerned, for the purpose of computing profitschargeable to corporation tax under Case I of Schedule D as would have ensued if the animals had been sold for the price which they would have fetched if sold in the open market.

• (2) In this paragraph “body of persons” includes a partnership, and “control” has the meaning given by section 840.

6

• (1) Where the whole or a substantial part of a production herd kept by a farmer for the purposes of its farming is slaughtered by the order of any Ministry, government department or local or public authority under the law relating to the diseases of animals in such circumstances that compensation is payable in respect of it, an election for the herd basis thereupon made by the farmer in relation to that herd and any other production herds of the same class so kept by the farmer shall, subject to sub-paragraph (2) below, be valid notwithstanding that it is not made within the time required by paragraph 2(3) above.

• (2) An election for the herd basis made by virtue of sub-paragraph (1) above shall only be valid if made—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) in the case of an election on behalf of persons in partnership, not later than twelve months from the 31st January next following the year of assessment in which the qualifying period of account ends; and

• (c) in the case of an election by a person chargeable to corporation tax, not later than two years from the end of the qualifying accounting period.

• (3) An election for the herd basis made by virtue of sub-paragraph (1) above shall, notwithstanding paragraph 2(4) above, have effect—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) in a case falling within sub-paragraph (2)(b) above, for the qualifying period of account and all subsequent periods of account; and

• (c) in a case falling within sub-paragraph (2)(c) above, for the qualifying accounting period and all subsequent accounting periods.

• (4) In this paragraph—

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “qualifying accounting period”, in relation to a person chargeable to corporation tax, means the first accounting period in which the compensation is relevant;

• “qualifying period of account”, in relation to persons in partnership, means the first period of account in which the compensation is relevant;

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) For the purposes of this paragraph, compensation shall be deemed to be relevant in any period if, but only if, it falls (or would but for an election under this paragraph fall) to be taken into account as a trading receipt in computing the profits or losses of that or an earlier period.

Exclusion of working animals, and interpretation of preceding provisions

7

Nothing in this Schedule applies to any animals kept wholly or mainly for the work they do in connection with the carrying on of the farming.

8

• (1) In this Schedule “herd” includes a flock, and any other collection of animals however named.

• (2) For the purposes of this Schedule, immature animals kept in a herd shall not be treated as forming part of the herd unless—

• (a) the land on which the herd is kept is such that animals which die or cease to form part of the herd cannot be replaced except by animals bred and reared on that land; and

• (b) the immature animals in question are bred in the herd, are maintained in the herd for the purpose of replacement, and are necessarily maintained for that purpose;

and references in this Schedule to herds shall be construed accordingly.

• (3) References in this Schedule to an animal being added to a herd include references to an immature animal which is kept in the herd becoming a mature animal except that not more immature animals shall be treated as forming part of a herd than are required to prevent a fall in the numbers of the herd.

• (4) Female animals shall be treated for the purposes of this Schedule as becoming mature when they produce their first young.

• (5) In this Schedule “a production herd” means, in relation to a farmer, a herd of animals of the same species (irrespective of breed) kept by the farmer wholly or mainly for the sake of the products which they produce for the farmer to sell, being products obtainable from the living animal.

• In this sub-paragraph “products obtainable from the living animal” means—the young of the animal, orany other product obtainable from the animal, not being a product obtainable only by slaughtering the animal itself.

• (6) For the purposes of this Schedule, production herds kept by a farmer shall be deemed to be of the same class if, and only if, all the animals kept in the herds are of the same species (irrespective of breed) and the products produced for the farmer to sell for the sake of which (either wholly or mainly) the herds are kept by the farmer are of the same kinds in the case of all the herds; and elections for the herd basis shall be framed accordingly.

• (7) Any reference in this Schedule to profits chargeable to corporation tax under Schedule D includes a reference to profits which would be so chargeable if there were any such profits for the accounting period in question.

Application of preceding provisions to trades other than farming, creatures other than animals, and animals and creatures kept singly

9

• (1) The preceding provisions of this Schedule shall, with the necessary adaptations, apply in relation to trades other than farming, and trades consisting only in part of farming as they apply in relation to farming, and references to farmers shall be construed accordingly.

• (2) Those provisions shall (both in relation to farming and in relation to other trades) apply in relation to living creatures other than animals as they apply in relation to animals.

• (3) Laying birds shall be treated for the purposes of this Schedule as becoming mature when they first lay.

• (4) The provisions of this Schedule shall (both in relation to farming and in relation to other trades) apply, with the necessary adaptations —

• (a) in relation to animals or other creatures kept singly as they apply in relation to herds; and

• (b) in relation to shares in animals or other creatures as they apply in relation to animals or other creatures themselves.

• (5) Nothing in this Schedule shall apply in relation to any animal or other creature kept wholly or mainly for public exhibition or for racing or other competitive purposes.

Supplemental and saving

10

Where an election for the herd basis is made, every person carrying on any farming or other trade affected by the election shall, if required to do so by notice from the inspector, make and deliver to the inspector, within the time specified in the notice, such returns as to, and as to the products of, the animals or other creatures kept by him for the purposes of the trade as may be required by the notice.

11

Where an election for the herd basis has effect for any accounting period after an assessment for that period has become final and conclusive, any such assessment or, on a claim therefor, repayment of tax shall be made as may be necessary to give effect to the election.

12

The validity of an election for the herd basis in force immediately before the commencement of this Schedule and made in pursuance of—

• (a) section 35 of the Finance Act 1973 on or after 25th July 1973 and before 6th April 1976, or

• (b) section 48(6) to (9) of the Finance Act 1984,

shall not be affected by the repeal of those sections by this Act.

SCHEDULE 6

Part I — Tables of Flat Rate Cash Equivalents

PART II — SUPPLEMENTARY PROVISIONS

Application of Tables A and B

1

• (1) The cash equivalent of the benefit is the appropriate percentage for the year of the price of the car as regards the year.

• (2) This is subject to paragraphs 6 and 7 below (reductions for periods when car unavailable and payments for use of car).

Reduction for periods when car not available for use

2

The appropriate percentage for the year is determined in accordance with paragraphs 3 to 5G below.

Car used preponderantly for business purposes

3

• (1) This paragraph applies where—

• (a) the car—

• (i) is first registered on or after 1st January 1998 but before 1st October 1999, and

• (ii) when so registered conformed to a vehicle type with an EC type-approval certificate, or had a UK approval certificate, that specifies a CO₂ emissions figure in terms of grams per kilometre driven, or

• (b) the car—

• (i) is first registered on or after 1st October 1999, and

• (ii) is so registered on the basis of an EC certificate of conformity or UK approval certificate that specifies a CO₂ emissions figures in terms of grams per kilometre driven.

• (2) In this paragraph references to “the applicable CO₂ emissions figure” are—

• (a) if the car is within sub-paragraph (1)(a) above, to the figure mentioned in paragraph (ii) of that sub-paragraph, and

• (b) if the car is within sub-paragraph (1)(b) above—

• (i) where the EC certificate of conformity or UK approval certificate specifies only one CO₂ emissions figure, that figure, and

• (ii) where it specifies more than one, the figure specified as the CO₂ emissions (combined) figure.

This is subject to paragraph 5 (bi-fuel cars) and paragraph 5A (disabled drivers).

• (3) Where the applicable CO₂ emissions figure does not exceed the lower threshold for the year the appropriate percentage for the year is 15% (“the basic percentage”).

• (4) Where the applicable CO₂ emissions figure exceeds the lower threshold for the year, the appropriate percentage for the year is whichever is the smaller of—

• (a) the basic percentage increased by 1% for each 5 grams per kilometre by which the applicable CO₂ emissions figure exceeds the lower threshold for the year, and

• (b) 35%.

• (5) This paragraph is subject to paragraph 5D (diesel car supplement) and any regulations under paragraph 5E (power to provide for discounts).

Reduction for employee paying for use of car

4

• (1) For the purposes of paragraph 3 above the lower threshold is ascertained from the following Table—

Year of assessment	Lower threshold (in g/km)
2002-03	165
2003-04	155
2004-05 and subsequent years of assessment	145

• (2) The Treasury may by order provide for a lower threshold different from that provided for in the Table in sub-paragraph (1) above to apply for years of assessment beginning on or after 6th April 2005 or such later date as may be specified in the order.

• (3) For the purposes of paragraph 3 above the applicable CO₂ emissions figure (if it is not a multiple of five) is rounded down to the nearest multiple of five.

Cars with insubstantial business use and additional cars

5

Where the car—

• (a) is first registered on or after 1st January 2000, and

• (b) is so registered on the basis of an EC certificate of conformity, or UK approval certificate, that specifies separate CO₂ emissions figures in terms of grams per kilometre driven for different fuels,

then, for the purposes of paragraph 3 above, “the applicable CO₂ emissions figure” is the lowest figure specified or, if there is more than one figure specified in relation to each fuel, the lowest CO₂ emissions (combined) figure specified.

SCHEDULE 7

PART I — MEANING OF “OBTAINED BY REASON OF EMPLOYMENT”

1