Finance Act 2001

• (a) a person is under a duty to pay to the Commissioners at any time an amount or amounts in respect of aggregates levy; and

• (b) the Commissioners are under a duty to pay to that person at the same time an amount or amounts in respect of that levy or any of the other taxes under their care and management.

• (2) Regulations under this paragraph may provide that if the total of the amount or amounts mentioned in sub-paragraph (1)(a) above exceeds the total of the amount or amounts mentioned in sub-paragraph (1)(b) above, the latter shall be set off against the former.

• (3) Regulations under this paragraph may provide that if the total of the amount or amounts mentioned in sub-paragraph (1)(b) above exceeds the total of the amount or amounts mentioned in sub-paragraph (1)(a) above, the Commissioners may set off the latter in paying the former.

• (4) Regulations under this paragraph may provide that if the total of the amount or amounts mentioned in sub-paragraph (1)(a) above is the same as the total of the amount or amounts mentioned in sub-paragraph (1)(b) above no payment need be made in respect of the former or the latter.

• (5) Regulations under this paragraph may provide for any limitation on the time within which the Commissioners are entitled to take steps for recovering any amount due to them in respect of aggregates levy to be disregarded, in such cases as may be described in the regulations, in determining whether any person is under such a duty to pay as is mentioned in sub-paragraph (1)(a) above.

• (6) Regulations under this paragraph may include provision treating any duty to pay mentioned in sub-paragraph (1) above as discharged accordingly.

• (7) References in sub-paragraph (1) above to an amount in respect of a particular tax include references not only to an amount of tax itself but also to other amounts such as interest and penalties that are or may be recovered as if they were amounts of tax.

• (8) In this paragraph “tax” includes levy or duty.

Set-off of or against other taxes and duties

10

• (1) The Commissioners may by regulations make provision in relation to any case where—

• (a) a person is under a duty to pay to the Commissioners at any time an amount or amounts in respect of any tax (or taxes) under their care and management other than aggregates levy; and

• (b) the Commissioners are under a duty, at the same time, to make any repayment of aggregates levy to that person or to make any other payment to him of any amount or amounts in respect of aggregates levy.

• (2) Regulations under this paragraph may provide that if the total of the amount or amounts mentioned in sub-paragraph (1)(a) above exceeds the total of the amount or amounts mentioned in sub-paragraph (1)(b) above, the latter shall be set off against the former.

• (3) Regulations under this paragraph may provide that if the total of the amount or amounts mentioned in sub-paragraph (1)(b) above exceeds the total of the amount or amounts mentioned in sub-paragraph (1)(a) above, the Commissioners may set off the latter in paying the former.

• (4) Regulations under this paragraph may provide that if the total of the amount or amounts mentioned in sub-paragraph (1)(a) above is the same as the total of the amount or amounts mentioned in sub-paragraph (1)(b) above no payment need be made in respect of the former or the latter.

• (5) Regulations under this paragraph may provide for any limitation on the time within which the Commissioners are entitled to take steps for recovering any amount due to them in respect of any of the taxes under their care and management to be disregarded, in such cases as may be described in the regulations, in determining whether any person is under such a duty to pay as is mentioned in sub-paragraph (1)(a) above.

• (6) Regulations under this paragraph may include provision treating any duty to pay mentioned in sub-paragraph (1) above as discharged accordingly.

• (7) References in sub-paragraph (1) above to an amount in respect of a particular tax include references not only to an amount of tax itself but also to other amounts such as interest and penalties that are or may be recovered as if they were amounts of tax.

• (8) In this paragraph “tax” includes levy or duty.

Restriction on powers to provide for set-off

11

• (1) Regulations made under paragraph 9 or 10 above shall not require any such amount or amounts as are mentioned in sub-paragraph (1)(b) of that paragraph (“the credit”) to be set against any such amount or amounts as are mentioned in sub-paragraph (1)(a) of that paragraph (“the debit”) in any case where—

• (a) an insolvency procedure has been applied to the person entitled to the credit;

• (b) the credit became due after that procedure was so applied; and

• (c) the liability to pay the debit either arose before that procedure was so applied or (having arisen afterwards) relates to, or to matters occurring in the course of, the carrying on of any business at times before the procedure was so applied.

• (2) For the purposes of this paragraph, an insolvency procedure is applied to a person if—

• (a) a bankruptcy order, winding-up order or administration order is made or an administrator is appointed in relation to that person or an award of sequestration is made on that person’s estate;

• (b) that person is put into administrative receivership;

• (c) that person passes a resolution for voluntary winding up;

• (d) any voluntary arrangement approved in accordance with—

• (i) Part 1 or 8 of the Insolvency Act 1986 (c. 45), or

• (ii) Part II or Chapter II of Part VIII of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)),

comes into force in relation to that person;

• (e) a deed of arrangement registered in accordance with—

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

• (ii) Chapter I of Part VIII of that Order,

takes effect in relation to that person;

• (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

• (h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (i) that person’s estate becomes vested in any other person as that person’s trustee under a trust deed (within the meaning of the Bankruptcy (Scotland) Act 2016).

• (3) In this paragraph references, in relation to any person, to the application of an insolvency procedure to that person shall not include—

• (a) the making of a bankruptcy order, winding-up order... or award of sequestration or the appointment of an administrator at a time when any such arrangement or deed as is mentioned in paragraph (d), (e) or (i) of sub-paragraph (2) above is in force in relation to that person;

• (b) the making of a winding-up order at any of the following times, that is to say—

• (i) immediately upon the appointment of an administrator in respect of the person ceasing to have effect;

• (ii) when that person is being wound up voluntarily;

• (iii) when that person is in administrative receivership;

or

• (c) the making of an administration order in relation to that person at any time when that person is in administrative receivership.

• (4) For the purposes of this paragraph a person shall be regarded as being in administrative receivership throughout any continuous period for which (disregarding any temporary vacancy in the office of receiver) there is an administrative receiver of that person.

• (5) In this paragraph—

• “administration order” means an administration order under Schedule B1 to the Insolvency Act 1986 (c. 45) or Article 21 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) ;

• “administrative receiver” means an administrative receiver within the meaning of section 251 of that Act of 1986 or Article 5(1) of that Order of 1989.

Supplemental provisions of Schedule

12

• (1) Any notification of an assessment under any provision of this Schedule to a person’s representative shall be treated for the purposes of this Part of this Act as notification to the person in relation to whom the representative acts.

• (2) In this paragraph “representative”, in relation to any person, means—

• (a) any of that person’s personal representatives;

• (b) that person’s trustee in bankruptcy or liquidator;

• (c) any person holding office as a receiver in relation to that person or any of his property;

• (d) that person’s tax representative or any other person for the time being acting in a representative capacity in relation to that person.

• (3) In this paragraph “trustee in bankruptcy” includes, as respects Scotland—

• (a) a trustee or interim trustee in the sequestration, under the Bankruptcy (Scotland) Act 2016, of a person’s estate; and

• (b) a trustee acting under a trust deed (within the meaning of that Act).

• (4) The powers conferred by paragraphs 9 and 10 of this Schedule are without prejudice to any power of the Commissioners to provide by tax credit regulations for any amount to be set against another.

SCHEDULE 9

Eligibility for group treatment

1

Two or more bodies corporate are eligible to be treated as members of a group for the purposes of this Part of this Act if—

• (a) each of them has an established place of business in the United Kingdom; and

• (b) they are all under the same control.

Application for group treatment

2

• (1) Subject to sub-paragraph (3) below, where an application is made to the Commissioners with respect to two or more bodies corporate and those bodies are all eligible to be treated as members of the same group, then, from the specified time—

• (a) they shall be so treated for the purposes of this Part of this Act; and

• (b) such one of them as is specified in the application shall be the representative member.

• (2) Subject to sub-paragraph (3) below, where—

• (a) any bodies corporate are treated as members of a group for the purposes of this Part of this Act, and

• (b) an application is made to the Commissioners for the addition to the group of a body corporate that is eligible to be treated as a member of the group,

then, from the specified time, that body shall be included among the bodies so treated.

• (3) The Commissioners may refuse an application under sub-paragraph (1) or (2) above if, and only if, it appears to them necessary to do so for the protection of the revenue; and an application that is refused under this sub-paragraph shall be, and be treated as always having been, ineffective.

• (4) Where—

• (a) it appears to the Commissioners that an application has been made for the purposes of this paragraph for a body corporate to be treated as a member of a group, but

• (b) that body is not eligible to be treated as a member of that group,

the Commissioners shall give notice to the applicant that the application is ineffective.

• (5) The Commissioners shall not refuse an application under sub-paragraph (3) above after the end of the period of ninety days beginning with the day on which the application is received by the Commissioners.

Modification of group treatment

3

• (1) Subject to sub-paragraph (2) below, where any bodies corporate are treated as members of a group for the purposes of this Part of this Act and an application for the purpose is made to the Commissioners, then, from the specified time—

• (a) a body corporate shall be excluded from the bodies so treated;

• (b) one of those bodies corporate shall be substituted for another body corporate as the representative member; or

• (c) the bodies corporate shall no longer be treated as members of a group.

• (2) The Commissioners may refuse an application made for the purpose mentioned in sub-paragraph (1)(a) or (c) above if, and only if—

• (a) the case is not one appearing to them to fall within paragraph 4(2)(a) and (b) below; and

• (b) it appears to them necessary to refuse the application for the protection of the revenue.

• (3) The Commissioners may refuse an application made for the purpose mentioned in sub-paragraph (1)(b) above if, and only if, it appears to them necessary to do so for the protection of the revenue.

• (4) An application that is refused under this paragraph shall be, and be treated as always having been, ineffective.

• (5) The specified time for the purposes of an application under sub-paragraph (1) above shall not be before the beginning of the accounting period which is current when the application is made.

Termination of group treatment

4

• (1) If it appears to the Commissioners necessary to do so for the protection of the revenue, the Commissioners may, by notice given to any body corporate that is treated as a member of a group and to the representative member, terminate that treatment from such time as may be specified in the notice.

• (2) Where—

• (a) a body corporate is treated as a member of a group, and

• (b) it appears to the Commissioners that it is not eligible to be treated as a member of that group,

they shall, by notice given to the body corporate and the representative member, terminate that treatment from such time as may be specified in the notice.

• (3) Where—

• (a) a body corporate ceases as from any time to be treated as a member of a group,

• (b) immediately before that time that body was the representative member,

• (c) there are two or more other bodies corporate which will continue after that time to be treated as members of the group, and

• (d) none of those bodies corporate is substituted from that time, or from before that time, as the representative member of the group under paragraph 3(1)(b) above,

the Commissioners shall, by notice given to such one of the bodies corporate mentioned in paragraph (c) above as they think fit, substitute that body corporate as the representative member as from that time.

• (4) The time specified in a notice under sub-paragraph (1) above shall not be a time before the day on which the notice is given to the representative member.

• (5) Subject to sub-paragraph (6) below, the time specified in a notice under sub-paragraph (2) or (3) above may be a time before the giving of the notice.

• (6) In the case of a notice given under sub-paragraph (2) above in respect of a body corporate’s having ceased to be eligible to be treated as a member of a group, the time specified in the notice shall not be before the time when it so ceased.

Applications relating to group treatment

5

An application under this Schedule with respect to any bodies corporate must be made by one of those bodies or by the person controlling them.

Notifications relating to group treatment

6

• (1) Where—

• (a) two or more bodies corporate are treated as members of a group for the purposes of this Part of this Act, and

• (b) any of those bodies ceases to be eligible to be so treated,

the body corporate which ceases to be so eligible shall notify the Commissioners of that fact.

• (2) A body corporate which is designated as representative member in relation to any other bodies corporate shall not cease to have an established place of business in the United Kingdom without first notifying the Commissioners of that fact.

• (3) A body corporate which fails to comply with sub-paragraph (1) or (2) above shall be liable to a penalty of £250.

Supplemental regulations about applications and notifications

7

• (1) For the purposes of any provision made by or under this Schedule for an application to be made to the Commissioners, regulations made by the Commissioners may make provision—

• (a) as to the time within which the application is to be made;

• (b) as to the form and manner in which the application is to be made;

• (c) as to the information and other particulars to be contained in or provided with any application.

• (2) For those purposes the Commissioners may also by regulations impose obligations requiring a person who has made an application to notify the Commissioners if any information contained in or provided in connection with that application is or becomes inaccurate.

• (3) The power under this paragraph to make regulations as to the time within which any application is to be made shall include power to authorise the Commissioners to extend the time for the making of an application.

• (4) Sub-paragraphs (1) to (3) above shall apply for the purposes of any provision made by or under this Schedule for any matter to be notified to the Commissioners as they apply for the purposes of any provision so made for an application to be made to them; and for this purpose references to the making of the application shall be construed as references to the giving of the notification.

Interpretation of Schedule

8

• (1) For the purposes of this Schedule two or more bodies are under the same control if—

• (a) one of them controls each of the others;

• (b) one person (whether a body corporate or an individual) controls all of them; or

• (c) two or more individuals carrying on a business in partnership control all of them.

• (2) For the purposes of this Schedule a body corporate shall be taken to control another body corporate if, and only if—

• (a) it is empowered by statute to control that body’s activities; or

• (b) it is that body’s holding company within the meaning of section 1159 of and Schedule 6 to the Companies Act 2006 (c. 46).

• (3) For the purposes of this Schedule an individual or individuals shall be taken to control a body corporate if, and only if (were he or they a company) he or they would be that body’s holding company within the meaning of those provisions.

• (4) In this Schedule “the specified time”, in relation to an application made under paragraph 2(1) or (2) or 3(1) above, means the beginning of such accounting period as may be specified in the application.

SCHEDULE 10

Preliminary

1

• (1) In this Schedule “civil penalty” means any penalty liability to which—

• (a) is imposed by or under this Part of this Act; and

• (b) arises otherwise than in consequence of a person’s conviction for a criminal offence.

• (2) In this Schedule—

• (a) references to a person’s being liable to a civil penalty include references to his being a person from whom the whole or any part of a civil penalty is recoverable by virtue of paragraph 8 of Schedule 6 to this Act; and

• (b) references, in relation to a person from whom the whole or any part of a civil penalty is so recoverable, to the penalty to which he is liable are references to so much of the penalty as is recoverable from him.

• (3) Any notification of an assessment under any provision of this Schedule to a person’s representative shall be treated for the purposes of this Part of this Act as notification to the person in relation to whom the representative acts.

• (4) In this paragraph “representative”, in relation to any person, means—

• (a) any of that person’s personal representatives;

• (b) that person’s trustee in bankruptcy or liquidator;

• (c) any person holding office as a receiver in relation to that person or any of his property;

• (d) that person’s tax representative or any other person for the time being acting in a representative capacity in relation to that person.

• (5) In this paragraph “trustee in bankruptcy” includes, as respects Scotland—

• (a) a trustee or interim trustee in the sequestration, under the Bankruptcy (Scotland) Act 2016, of a person’s estate; and

• (b) a trustee acting under a trust deed (within the meaning of that Act).

Assessments to penalties etc.

2

• (1) Where a person is liable to a civil penalty, the Commissioners may assess the amount due by way of penalty and notify it to him accordingly.

• (2) If, where an assessment has been notified to any person under sub-paragraph (1) above or this sub-paragraph, it appears to the Commissioners that the amount which ought to have been assessed exceeds the amount that has already been assessed, the Commissioners may make a supplementary assessment of the amount of the excess and notify that person accordingly.

• (3) The fact that any conduct giving rise to a civil penalty may have ceased before an assessment is made under this paragraph shall not affect the power of the Commissioners to make such an assessment.

• (4) Where an amount has been assessed and notified to any person under this paragraph, it shall be recoverable as if it were aggregates levy due from him.

• (5) Sub-paragraph (4) above—

• (a) shall not apply so as to require any interest to be payable on a penalty otherwise than in accordance with this Schedule; and

• (b) shall not have effect if, or to the extent that, the assessment in question has been withdrawn or reduced.

• (6) Subject to sub-paragraph (7) below, where a person—

• (a) is assessed under this paragraph to an amount due by way of a penalty, and

• (b) is also assessed under any one or more provisions of Schedule 5 to this Act for an accounting period to which the conduct attracting the penalty is referable,

the assessments may be combined and notified to him as one assessment.

• (7) A notice of a combined assessment under sub-paragraph (6) above must separately identify the penalty being assessed.

• (8) The power to make an assessment under this paragraph is subject to paragraph 8(4) of Schedule 6 to this Act.

Further assessments to daily penalties

3

• (1) This paragraph applies where an assessment is made under paragraph 2 above to an amount of a civil penalty to which any person is liable—

• (a) under paragraph 1(3) of Schedule 7 to this Act (failure to provide information); or

• (b) under paragraph 4(4) of that Schedule (failure to produce a document).

• (2) The notice of assessment shall specify a time, not later than the end of the day of the giving of the notice of assessment, to which the amount of any daily penalty is calculated.

• (3) For the purposes of sub-paragraph (2) above “daily penalty” means—

• (a) in a case within sub-paragraph (1)(a) above, a penalty imposed by virtue of paragraph 1(3)(b) of Schedule 7 to this Act; and

• (b) in a case within sub-paragraph (1)(b) above, a penalty imposed by virtue of paragraph 4(4)(b) of that Schedule.

• (4) If further penalties accrue in respect of a continuing failure after that date to provide the information or, as the case may be, produce the document, a further assessment or further assessments may be made under paragraph 2 above in respect of the amounts so accruing.

• (5) Where—

• (a) an assessment to a civil penalty is made specifying a date for the purposes of sub-paragraph (2) above, and

• (b) the failure in question is remedied within such period as may for the purposes of this sub-paragraph have been notified by the Commissioners to the person liable for the penalty,

the failure shall be deemed for the purposes of any further liability to civil penalties to have been remedied on the specified date.

Time limits on penalty assessments

4

• (1) Subject to sub-paragraphs (2) and (3) below, an assessment under paragraph 2 above to a civil penalty shall not be made more than 4 years after the conduct to which the penalty relates.

• (2) An assessment of a person to a civil penalty in a case involving a loss of aggregates levy—

• (a) brought about deliberately by the person (or by another person acting on that person's behalf), or

• (b) attributable to a failure by the person to comply with an obligation under section 24(2) or paragraph 1 of Schedule 4,

may be made at any time not more than 20 years after the conduct to which the penalty relates (subject to sub-paragraph (3)).

• (2A) In sub-paragraph (2)(a) the reference to a loss brought about deliberately by the person includes a loss brought about as a result of a deliberate inaccuracy in a document given to Her Majesty's Revenue and Customs by or on behalf of that person.

• (3) Where, after a person’s death, the Commissioners propose to assess an amount of a civil penalty due by reason of some conduct of the deceased—

• (a) the assessment shall not be made more than 4 years after the death; ...

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

Penalty interest on unpaid penalties

5

• (1) Subject to sub-paragraph (2) below, where the Commissioners make an assessment under paragraph 2 above of any civil penalty to which a person is liable the amount of that penalty shall carry penalty interest for the period which—

• (a) begins with the day on which the assessment is notified to the person on whom the assessment is made; and

• (b) ends with the day before the day on which the assessed penalty is paid.

• (2) Where—

• (a) the Commissioners make an assessment under paragraph 2 above of an amount of any civil penalty to which any person is liable,

• (b) they also specify a date for the purposes of this sub-paragraph, and

• (c) the amount of the penalty assessed is paid on or before that date,

the amount paid before that date shall not carry penalty interest under this paragraph.

• (3) Penalty interest under this paragraph shall be compound interest calculated—

• (a) at the penalty rate; and

• (b) with monthly rests.

• (4) For this purpose the penalty rate is the rate found by—

• (a) taking the rate applicable under section 197 of the Finance Act 1996 (c. 8) for the purposes of paragraph 8(3)(a) of Schedule 5 to this Act; and

• (b) adding 10 percentage points to that rate.

• (5) Where a person is liable under this paragraph to pay any penalty interest, the Commissioners or, on appeal, an appeal tribunal may reduce the amount payable to such amount (including nil) as they think proper.

• (6) Subject to sub-paragraph (7) below, where the person concerned satisfies the Commissioners or, on appeal, an appeal tribunal that there is a reasonable excuse for the conduct giving rise to the liability to pay penalty interest, that is a matter which (among other things) may be taken into account under sub-paragraph (5) above.

• (7) In determining whether there is a reasonable excuse for the purposes of sub-paragraph (6) above, no account shall be taken of any of the following matters, that is to say—

• (a) the insufficiency of the funds available to any person for paying any aggregates levy or penalty due or for paying the amount of the interest;

• (b) the fact that there has, in the case in question or in that case taken with any other cases, been no or no significant loss of aggregates levy;

• (c) the fact that the person liable to pay the interest or a person acting on his behalf has acted in good faith.

• (8) In the case of interest reduced by the Commissioners under sub-paragraph (5) above, an appeal tribunal, on an appeal relating to the interest, may cancel the whole or any part of the reduction made by the Commissioners.

Supplemental provisions about interest

6

• (1) Interest under paragraph 5 above shall be paid without any deduction of income tax.

• (2) Sub-paragraph (3) below applies where—

• (a) an amount carries interest under paragraph 5 above (or would do so apart from that sub-paragraph); and

• (b) all or part of the amount turns out not to be due.

• (3) In such a case—

• (a) the amount or part that turns out not to be due shall not carry interest under paragraph 5 above and shall be treated as never having done so; and

• (b) all such adjustments as are reasonable shall be made, including (subject to section 32 of, and Schedule 8 to, this Act) adjustments by way of repayment.

Assessments to penalty interest on unpaid penalties

7

• (1) Where a person is liable for interest under paragraph 5 above, the Commissioners may assess the amount due by way of interest and notify it to him accordingly.

• (2) If, where an assessment has been notified to any person under sub-paragraph (1) above or this sub-paragraph, it appears to the Commissioners that the amount which ought to have been assessed exceeds the amount that has already been assessed, the Commissioners may make a supplementary assessment of the amount of the excess and notify that person accordingly.

• (3) Where an amount has been assessed and notified to any person under this paragraph, it shall be recoverable as if it were aggregates levy due from him.

• (4) Sub-paragraph (3) above—

• (a) shall not apply so as to require any interest to be payable on interest (except in so far as it falls to be compounded in accordance with paragraph 5(3) above); and

• (b) shall not have effect if, or to the extent that, the assessment in question has been withdrawn or reduced.

• (5) Paragraph 4 above shall apply in relation to assessments under this paragraph as if any assessment to interest on a penalty were an assessment under paragraph 2 above to the penalty in question.

• (6) Subject to sub-paragraph (7) below, where a person—

• (a) is assessed under this paragraph to an amount due by way of any interest on a penalty, and

• (b) is also assessed under any one or more provisions of Schedule 5 to this Act for the accounting period to which the conduct attracting the penalty is referable,

the assessments may be combined and notified to him as one assessment.

• (7) A notice of a combined assessment under sub-paragraph (6) above must separately identify the interest being assessed.

Further assessments to interest on penalties

8

• (1) Where an assessment is made under paragraph 7 above to an amount of penalty interest under paragraph 5 above—

• (a) the notice of assessment shall specify a date, not later than the date of the notice of assessment, to which the amount of interest which is assessed is calculated; and

• (b) if the interest continues to accrue after that date, a further assessment or further assessments may be made under paragraph 7 above in respect of the amounts so accruing.

• (2) Where—

• (a) an assessment to penalty interest is made specifying a date for the purposes of sub-paragraph (1)(a) above, and

• (b) within such period as may for the purposes of this sub-paragraph have been notified by the Commissioners to the person liable for the interest, the amount on which the interest is payable is paid,

that amount shall be deemed for the purposes of any further liability to interest to have been paid on the specified date.

SCHEDULE 11

Introduction

1

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

Child living with married or unmarried couple

2

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

Election that credit should go to lower-earning partner

3

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

Child living with more than one adult: other cases

4

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

Combined cases

5

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

Change of circumstances

6

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

SCHEDULE 12

Part 1 — NEW SCHEDULE 12AA TO THE TAXES ACT 1988

After Schedule 12 to the Taxes Act 1988 insert—

SCHEDULE 12AA (1) (1) The provisions of this Schedule apply for the purposes of sections 197AD to 197AG (Schedule E exemption for mileage allowance payments and passenger payments and mileage allowance relief). (2) Expressions defined in this Schedule for those purposes have the same meaning for the purposes of this Schedule. (3) In this Schedule “mileage allowance payments” has the meaning given by section 197AD(2) and “passenger payments” has the meaning given by section 197AE(2). (2) “Business travel” means travelling the expenses of which, if incurred and defrayed by the employee in question out of the emoluments of his employment, would (in the absence of sections 197AD to 197AF) be deductible under section 198(1) (general relief for necessary expenses). (3) (1) “Qualifying vehicle” means a car, van, motor cycle or cycle. (2) “Car” means a mechanically propelled road vehicle which is not— (a) a goods vehicle, (b) a motor cycle, or (c) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used. (3) “Van” means a mechanically propelled road vehicle which— (a) is a goods vehicle, and (b) has a design weight not exceeding 3,500 kilograms, and which is not a motor cycle. (4) “Motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988. (5) “Cycle” has the meaning given by section 192(1) of that Act. (6) In this paragraph— - “design weight” means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden; and - “goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description. (4) (1) The approved amount for mileage allowance payments that is applicable to a kind of vehicle is— $$M×R$ where— M is the number of miles of business travel by the employee (other than as a passenger), using that kind of vehicle, in the tax year in question; and R is the rate applicable for that kind of vehicle.$ (2) The rates applicable are as follows—

Kind of vehicle	Rate
Car or van	40p per mile for the first 10,000 miles;
Car or van	25p per mile after that
Motor cycle	24p per mile.
Cycle	20p per mile.

  Note: The reference above to “the first 10,000 miles” is to the total number of miles of business travel in relation to the employment or any associated employment, by car or van, in the tax year in question.

One employment is associated with another if— (a) the employer is the same; (b) the employers are partnerships or bodies and an individual or another partnership or body has control over both of them; or (c) the employers are associated companies (as defined in section 416). Section 168(12) (meaning of “control”) applies for the purposes of paragraph (b). (3) The Treasury may by regulations amend sub-paragraph (2) so as to alter the rates or rate bands. (5) (1) The approved amount for passenger payments is— $$M×R$ where— M is the number of miles of business travel by the employee, by car or van, for which the employee carries a qualifying passenger in the tax year in question and in respect of which passenger payments are made; and R is 5p per mile.$ (2) If the employee carries more than one qualifying passenger for all or part of a tax year, the approved amount for passenger payments is the total of the amounts calculated under sub-paragraph (1) in respect of each qualifying passenger. (3) In this paragraph “qualifying passenger” means a passenger who is also an employee for whom the travel is business travel. (4) The Treasury may by regulations amend sub-paragraph (1) so as to alter the rate. (6) (1) A vehicle is a “company vehicle” in a tax year if in that year— (a) the vehicle is made available to the employee by reason of his employment and is not available for his private use, or (b) the employee is chargeable to tax in respect of the vehicle under section 154, 157 or 159AA (charge where benefit provided or car or van available for private use), or (c) in the case of a car or van, the employee would be chargeable to tax in respect of it under section 157 or 159AA but for section 159 or 159AB (exception for pooled cars and vans), or (d) in the case of a cycle, the employee would be chargeable to tax in respect of it under section 154 but for section 197AC(1)(a) (exception for cycles made available). (2) Section 168(6) (when cars and vans are made available for private use and are made available by reason of employment) applies for the purposes of sub-paragraph (1). (7) “Employment” includes an office and “employee” includes an office-holder. (8) “Tax year” means a year of assessment.

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Part 2 — CONSEQUENTIAL AMENDMENTS

The Taxes Act 1988

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7

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9

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10

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11

In section 578A(1) of that Act (deductions for expenditure on car hire)—

• (a) after paragraph (a) insert “ or ”; and

• (b) omit paragraph (c) and the word “or” immediately preceding it.

12

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13

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14

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15

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Finance Act 2000 (c. 17)

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SCHEDULE 13

Introductory

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The employment requirement

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Meaning of “salary”

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No charge to tax on award of shares, etc.

4

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Charge on disposal of beneficial interest during holding period

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Charge on distributions in respect of unappropriated shares

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Dividend shares ceasing to be subject to plan: tax credit

7

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Gains accruing to trustees

8

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SCHEDULE 14

Introductory

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Period of notice

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General requirements to be met by option

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Purpose of granting option

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Value of options in respect of a company’s shares

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Income tax: option to acquire shares at less than market value

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Income tax: option to acquire shares at nil cost

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Disqualifying events: alteration of share capital

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Income tax charge arising on disqualifying event

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Qualifying requirements for replacement option

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Commencement

13

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SCHEDULE 15

Part 1 — INCOME TAX RELIEF

Introductory

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Oil activities

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5

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Requirement as to the money raised

6

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7

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8

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Repayment supplements

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Designated period

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11

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Unquoted company requirement

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13

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Royalties and licence fees

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Value received by individual etc.

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17

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18

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Repayment of share capital

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20

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21

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Claims

22

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Information

23

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Interpretation

24

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Part 2 — POSTPONEMENT OF CHARGEABLE GAIN ON REINVESTMENT

Introductory

25

Schedule 5B to the Taxation of Chargeable Gains Act 1992 (c. 12) is amended in accordance with this Part.

Requirement as to the money raised

26

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27

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28

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Designated period

29

In paragraph 3(1) (chargeable events) in both paragraph (c) and paragraph (d) for “within the designated period” substitute “ before the termination date relating to those shares ”.

Value received by investor

30

• (1) In paragraph 13 (value received by investor) in sub-paragraph (1) after “any value” insert “ (other than insignificant value) ”.

• (2) In that sub-paragraph for “designated period” substitute “ period of restriction ”.

• (3) After that sub-paragraph insert—

(1A) This paragraph is subject to paragraph 13B below. (1B) Where— (a) the individual who subscribes for the shares receives value (“the relevant receipt”) from the company during the period of restriction, (b) the individual has received from the company one or more receipts of insignificant value at a time or times— (i) during that period, but (ii) not later than the time of the relevant receipt, and (c) the aggregate amount of the value of the receipts within paragraphs (a) and (b) above is not an amount of insignificant value, the individual shall be treated for the purposes of this Schedule as if the relevant receipt had been a receipt of an amount of value equal to the aggregate amount. For this purpose a receipt does not fall within paragraph (b) above if it has previously been aggregated under this sub-paragraph.

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• (4) Omit sub-paragraph (4) of that paragraph (certain payments etc. received on a winding up or dissolution treated as receipts of value).

• (5) In sub-paragraph (10) of that paragraph (interpretation of provisions applying to paragraph 13) after “this paragraph” insert “ and paragraph 13A(1) below ”.

• (6) After sub-paragraph (11) of that paragraph insert—

(12) In paragraphs 13A to 13C below (except paragraph 13C(4))— (a) references to “the shares” shall be construed in accordance with sub-paragraph (1) above, and (b) references to “the period of restriction” shall be construed as references to the period of restriction relating to the shares.

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31

After paragraph 13 insert—

(13A) (1) For the purposes of paragraph 13 above, the value received by the individual in question is— (a) in a case within sub-paragraph (2)(a), (b) or (c) of that paragraph, the amount received by the individual or, if greater, the market value of the share capital, securities or debt in question; (b) in a case within sub-paragraph (2)(d) of that paragraph, the amount of the liability; (c) in a case within sub-paragraph (2)(e) of that paragraph, the amount of the loan or advance reduced by the amount of any repayment made before the issue of the shares; (d) in a case within sub-paragraph (2)(f) of that paragraph, the cost to the company of providing the benefit or facility less any consideration given for it by the individual; (e) in a case within sub-paragraph (2)(g) or (h) of that paragraph, the difference between the market value of the asset and the consideration (if any) given for it; (f) in a case within sub-paragraph (2)(i) of that paragraph, the amount of the payment; (g) in a case within sub-paragraph (5) of that paragraph, the amount received by the individual or, if greater, the market value of the share capital or securities in question. (2) In this paragraph and paragraph 13 above references to a receipt of insignificant value (however expressed) are references to a receipt of an amount of insignificant value. This is subject to sub-paragraph (4) below. (3) For the purposes of this paragraph and paragraph 13 above “an amount of insignificant value” means an amount of value which— (a) does not exceed £1,000, or (b) if it exceeds that amount, is insignificant in relation to the total amount of expenditure on the shares which is set under this Schedule against a corresponding total amount of the whole or any part of any chargeable gains. (4) For the purposes of paragraph 13 above, if, at any time in the period— (a) beginning one year before the shares are issued, and (b) expiring at the end of the issue date, arrangements are in existence which provide for the individual who subscribes for the shares to receive or to be entitled to receive, at any time in the period of restriction, any value from the company that issued the shares, no amount of value received by the individual shall be treated as a receipt of insignificant value. (5) In sub-paragraph (4) above— (a) any reference to the individual includes a reference to any person who, at any time in the period of restriction, is an associate of his (whether or not he is such an associate at the material time), and (b) the reference to the company includes a reference to any person who, at any time in the period of restriction, is connected with the company (whether or not that person is so connected at the material time). (13B) (1) Where— (a) by reason of a receipt of value within sub-paragraph (2) (other than paragraph (b)) or sub-paragraph (5) of paragraph 13 above (“the original value”), the shares would, in the absence of this paragraph, be treated as never having been eligible shares or as ceasing to be eligible shares on the date when the value is received, (b) the original supplier receives value (“the replacement value”) from the original recipient by reason of a qualifying receipt, and (c) the amount of the replacement value is not less than the amount of the original value, the receipt of the original value shall be disregarded for the purposes of paragraph 13 above. (2) This paragraph is subject to paragraph 13C below. (3) For the purposes of this paragraph and paragraph 13C below— - “the original recipient” means the person who receives the original value, and - “the original supplier” means the person from whom that value was received. (4) A receipt of the replacement value is a qualifying receipt for the purposes of sub-paragraph (1) above if it arises— (a) by reason of the original recipient doing one or more of the following— (i) making a payment to the original supplier, other than a payment which falls within paragraph (c) below or to which sub-paragraph (5) below applies; (ii) acquiring any asset from the original supplier for a consideration the amount or value of which is more than the market value of the asset; (iii) disposing of any asset to the original supplier for no consideration or for a consideration the amount or value of which is less than the market value of the asset; (b) where the receipt of the original value was within paragraph 13(2)(d) above, by reason of an event the effect of which is to reverse the event which constituted the receipt of the original value; or (c) where the receipt of the original value was within paragraph 13(5) above, by reason of the original recipient repurchasing the share capital or securities in question, or (as the case may be) reacquiring the right in question, for a consideration the amount or value of which is not less than the amount of the original value. (5) This sub-paragraph applies to— (a) any payment for any goods, services or facilities, provided (whether in the course of a trade or otherwise) by— (i) the original supplier, or (ii) any other person who, at any time in the period of restriction, is an associate of, or connected with, that supplier (whether or not that person is such an associate, or so connected, at the material time), which is reasonable in relation to the market value of those goods, services or facilities; (b) any payment of any interest which represents no more than a reasonable commercial return on money lent to— (i) the original recipient, or (ii) any person who, at any time in the period of restriction, is an associate of his (whether or not he is such an associate at the material time); (c) any payment for the acquisition of an asset which does not exceed its market value; (d) any payment, as rent for any property occupied by— (i) the original recipient, or (ii) any person who, at any time in the period of restriction, is an associate of his (whether or not he is such an associate at the material time), of an amount not exceeding a reasonable and commercial rent for the property; (e) any payment in discharge of an ordinary trade debt (within the meaning of paragraph 13(11) above); and (f) any payment for shares in or securities of any company in circumstances that do not fall within sub-paragraph (4)(a)(ii) above. (6) For the purposes of this paragraph, the amount of the replacement value is— (a) in a case within paragraph (a) of sub-paragraph (4) above, the aggregate of— (i) the amount of any payment within sub-paragraph (i) of that paragraph, and (ii) the difference between the market value of any asset within sub-paragraph (ii) or (iii) of that paragraph and the amount or value of the consideration (if any) received for it, (b) in a case within sub-paragraph (4)(b) above, the same as the amount of the original value, and (c) in a case within sub-paragraph (4)(c) above, the amount or value of the consideration received by the original supplier, and paragraph 13A(1) above applies for the purposes of determining the amount of the original value. (7) In this paragraph any reference to a payment to a person (however expressed) includes a reference to a payment made to him indirectly or to his order or for his benefit. (13C) (1) The receipt of the replacement value by the original supplier shall be disregarded for the purposes of paragraph 13B above, as it applies in relation to the shares, to the extent to which that receipt has previously been set (under that paragraph) against any receipts of value which are, in consequence, disregarded for the purposes of paragraph 13 above as that paragraph applies in relation to those shares or any other shares subscribed for by the individual in question (“the individual”). (2) The receipt of the replacement value by the original supplier (“the event”) shall also be disregarded for the purposes of paragraph 13B above if— (a) the event occurs before the start of the period of restriction, or (b) in a case where the event occurs after the time the original recipient receives the original value, it does not occur as soon after that time as is reasonably practicable in the circumstances, or (c) where an appeal has been brought by the individual against an assessment made by virtue of paragraph 3(1)(e) above by reason of that receipt, the event occurs more than 60 days after the appeal has been finally determined. But nothing in paragraph 13B above or this paragraph requires the replacement value to be received after the original value. (3) Sub-paragraph (4) below applies where— (a) the receipt of the replacement value by the original supplier is a qualifying receipt for the purposes of paragraph 13B(1) above, and (b) the event which gives rise to the receipt is (or includes) a subscription for shares by— (i) the individual, or (ii) any person who, at any time in the period of restriction, is an associate of the individual, whether or not he is such an associate at the material time. (4) Where this sub-paragraph applies, the person who subscribes for the shares shall not— (a) be eligible for any relief under Chapter 3 of Part 7 of the Taxes Act (enterprise investment scheme: income tax relief) in relation to those shares or any other shares in the same issue, or (b) by virtue of his subscription for those shares or any other shares in the same issue, be treated as making a qualifying investment for the purposes of this Schedule. (5) In this paragraph “the original value” and “the replacement value” shall be construed in accordance with paragraph 13B above.

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Value received by persons other than the investor

32

• (1) In paragraph 14 (value received by persons other than the investor), in sub-paragraph (1)—

• (a) for “designated period” substitute “ period of restriction ”, and

• (b) for “paragraph 14A” substitute “ paragraphs 14AA and 14A ”.

• (2) In sub-paragraph (3) of that paragraph (repayments etc. excluded from the effects of paragraph 13(1))—

• (a) in paragraph (c) after “relief” insert “ attributable to shares held by that person ”, and

• (b) after paragraph (c) insert—

or it would have the effect mentioned in paragraph (a), (b) or (c) above were it not a receipt of insignificant value for the purposes of paragraph 13 above, section 300 of the Taxes Act or paragraph 47 of Schedule 15 to the Finance Act 2000, as the case may be

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• (3) In sub-paragraph (7) of that paragraph (meaning of “subsidiary” in paragraph 14) after “this paragraph” insert “ and paragraph 14AA below ”.

Certain receipts to be disregarded

33

After paragraph 14 insert—

(14AA) (1) Any repayment shall be disregarded for the purposes of paragraph 14 above if whichever is the greater of— (a) the market value of the shares to which it relates (“the target shares”) immediately before the event occurs, and (b) the amount received by the member in question, is insignificant in relation to the market value of the remaining issued share capital of the company in question (or, as the case may be, subsidiary in question) immediately after the event occurs. This is subject to sub-paragraph (4) below. (2) For the purposes of this paragraph “repayment” means a repayment, redemption, repurchase or payment mentioned in paragraph 14(1) above. (3) For the purposes of sub-paragraph (1) above it shall be assumed that the target shares are cancelled at the time the repayment is made. (4) Where an individual subscribes for eligible shares in a company, sub-paragraph (1) above does not apply to prevent paragraph 14(2) above having effect in relation to the shares if, at a relevant time, arrangements are in existence that provide— (a) for a repayment by the company or any subsidiary of the company (whether or not it is such a subsidiary at the time the arrangements are made), or (b) for anyone to be entitled to such a repayment, at any time in the period of restriction. (5) For the purposes of sub-paragraph (4) above “a relevant time” means any time in the period— (a) beginning one year before the eligible shares were issued, and (b) expiring at the end of the issue date.

.

34

In paragraph 14A (certain receipts to be disregarded for purposes of paragraph 14)—

• (a) for sub-paragraph (2) substitute—

(2) For the purposes of this paragraph “repayment” has the meaning given in paragraph 14AA(2) above.

,

• (b) omit sub-paragraph (7) (repayments treated, for the purposes of the corporate venturing scheme, as causing insignificant changes to share capital to be disregarded), and

• (c) in sub-paragraph (8)(a) for “that Schedule” substitute “ Schedule 15 to the Finance Act 2000 (corporate venturing scheme) ”.

Information

35

• (1) In paragraph 16 (information), in sub-paragraph (1)(a) for “in the designated period” substitute “ before the termination date relating to those shares ”.

• (2) After sub-paragraph (2) of that paragraph insert—

(2A) In determining, for the purposes of sub-paragraph (1) or (2) above, whether a chargeable event falling within paragraph 3(1)(e) above has occurred by virtue of paragraph 13(1)(b) above, the effect of paragraph 13B above shall be disregarded.

.

• (3) After sub-paragraph (3) of that paragraph insert—

(3A) Where— (a) a person is required to give a notice under sub-paragraph (1) or (2) above in respect of a chargeable event which occurs by virtue of paragraph 13(1)(b) above or would occur by virtue of that paragraph but for the operation of paragraph 13B above, and (b) that person has knowledge of the replacement value received (or expected to be received) from the original recipient by the original supplier by reason of a qualifying receipt, the notice shall include particulars of that receipt of the replacement value (or expected receipt). In this sub-paragraph “the replacement value”, “the original recipient”, “the original supplier” and “qualifying receipt” shall be construed in accordance with paragraph 13B above.

.

• (4) In sub-paragraph (5) of that paragraph, for “If” to “particular case,” substitute—

If the inspector has reason to believe— (a) that a person has not given a notice which he is required to give— (i) under sub-paragraph (1) or (2) above in respect of any chargeable event, or (ii) under sub-paragraph (4) above in respect of any particular case, or (b) that a person has given or received value (within the meaning of paragraph 13(2) or (5) above) which, but for the fact that the amount given or received was an amount of insignificant value (within the meaning of paragraph 13A(3) above), would have triggered a requirement to give a notice under sub-paragraph (1) or (2) above, or (c) that a person has made or received any repayment (within the meaning of paragraph 14AA(2) above) which, but for the fact that it falls to be disregarded for the purposes of paragraph 14 above by virtue of paragraph 14AA(1) above, would have triggered a requirement to give a notice under sub-paragraph (2) above,

.

• (5) The amendments made by this paragraph have effect in relation to events occurring on or after 7th March 2001.

Trustees: anti-avoidance

36

In paragraph 18 (trustees: anti-avoidance)—

• (a) in sub-paragraph (1) after “13” insert “ to 13C ”, and

• (b) in sub-paragraph (2)—

• (i) in paragraph (a) for “paragraph 13 above applies” substitute “ sub-paragraph (1) of paragraph 13 above applies, or that sub-paragraph would apply were it not for the fact that the amount of value is an amount of insignificant value for the purposes of that sub-paragraph ”, and

• (ii) after that paragraph insert—

(ab) in a case where paragraph 13(1) above would apply were it not for the operation of paragraph 13B above, the time when the original value (within the meaning of paragraph 13B above) in question is received;

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Interpretation

37

In paragraph 19 (interpretation), in sub-paragraph (1)—

• (a) after the definition of “ordinary shares” insert—

“the period of restriction”, in relation to any shares, means the period— (a) beginning one year before the shares are issued, and (b) ending immediately before the termination date relating to the shares;

,

• (b) in the definition of “qualifying company” after “Act” insert “ (except that for the purposes of this Schedule the reference in section 293(1B)(b)(i) of that Act to section 304A of that Act shall be read as a reference to paragraph 8 above) ”, and

• (c) at the end insert—

“termination date”, in relation to any shares, means the date found by applying the definition of “termination date” in section 312(1) of the Taxes Act by reference to the company that issued the shares and by reference to the shares.

.

Part 3 — MISCELLANEOUS AND GENERAL

Loss relief

38

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Penalties in connection with returns etc.

39

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Commencement

40

• (1) Except where provision is made to the contrary, the amendments made by this Schedule have effect in accordance with the following provisions of this paragraph.

• (2) The amendments made by paragraphs ... 26 to 29 and 37 have effect—

• (a) in relation to shares issued on or after 7th March 2001, and

• (b) in respect of the application of ... Schedule 5B to the Taxation of Chargeable Gains Act 1992 (c. 12) on or after 7th March 2001 in relation to shares—

• (i) that were issued after 31st December 1993 but before 7th March 2001, and

• (ii) to which income tax relief or deferral relief was attributable immediately before 7th March 2001.

• (3) The amendments made by paragraphs ... 30 to 34 and 36 have effect—

• (a) in relation to shares issued on or after 7th March 2001, and

• (b) in relation to shares issued before that date, in respect of the application of the provisions mentioned in sub-paragraph (2)(b) in relation to—

• (i) value received (within the meaning of ... paragraph 13 of Schedule 5B to the Taxation of Chargeable Gains Act 1992), and

• (ii) repayments made,

on or after that date.

• (4) For the purposes of this paragraph—

• “deferral relief” has the same meaning as in Schedule 5B to the Taxation of Chargeable Gains Act 1992 (c. 12) (enterprise investment scheme: reinvestment);

• “income tax relief” means relief under Chapter 3 of Part 7 of the Taxes Act 1988 (enterprise investment scheme); and

• “repayment” means a repayment, redemption, repurchase or payment mentioned in section 303(1) of the Taxes Act 1988 or paragraph 14(1) of Schedule 5B to the Taxation of Chargeable Gains Act 1992.

SCHEDULE 16

Part 1 — VENTURE CAPITAL TRUSTS

Meaning of “qualifying holdings”

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2

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Income tax relief: repayment supplements

3

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Part 2 — CORPORATE VENTURING SCHEME

Introductory

4

Schedule 15 to the Finance Act 2000 (c. 17) (corporate venturing scheme) is amended in accordance with this Part.

Money raised by issue of shares

5

• (1) In paragraph 36 (requirement that money raised is employed for purposes of a relevant trade), for sub-paragraph (1) substitute—

(1) At least 80% of the money raised by the issuance of the relevant issue of shares must have been employed wholly for the purposes of a relevant trade not later than the time determined in accordance with sub-paragraph (1B). (1A) All of the money so raised must have been so employed not later than 12 months after that time. (1B) The time referred to in sub-paragraph (1) is— (a) the end of the period of 12 months beginning with the issue of the shares, or (b) where the relevant trade was not being carried on at the time the shares were issued, the end of the period of 12 months beginning when the issuing company or a subsidiary begins to carry on the relevant trade. (1C) Sub-paragraphs (1) and (1A) are subject to sub-paragraph (5).

.

• (2) In sub-paragraph (5) of that paragraph—

• (a) in paragraph (a) for “any of the money mentioned in sub-paragraph (1)” substitute “ any of the money raised by the issuance of the relevant issue of shares ”, and

• (b) for “the requirement of sub-paragraph (1)” substitute “ the requirement of sub-paragraph (1) does not apply and the requirement of sub-paragraph (1A) ”.

• (3) The amendments made by this paragraph have effect—

• (a) in relation to shares issued on or after 7th March 2001, and

• (b) in respect of the application of Schedule 15 to the Finance Act 2000 (c. 17) (corporate venturing scheme) on or after 7th March 2001 in relation to shares—

• (i) that were issued after 31st March 2000 but before 7th March 2001, and

• (ii) to which investment relief (within the meaning of that Schedule) was attributable immediately before 7th March 2001.

Receipt of replacement value

6

• (1) In paragraph 54 (receipt of replacement value), at the beginning of sub-paragraph (1)(c) insert “ the amount of ”.

• (2) After sub-paragraph (2) of that paragraph insert—

(2A) Where the amount of the original value is, by virtue of paragraph 51, treated as reduced for the purposes of paragraph 47, the reference in sub-paragraph (1)(c) to the amount of the original value shall be read as a reference to the amount of that value disregarding the reduction.

.

• (3) In sub-paragraph (3) of that paragraph (qualifying receipts), for paragraphs (a) to (c) substitute—

(a) by reason of the original recipient doing one or more of the following— (i) making a payment to the original supplier other than an excepted payment; (ii) acquiring any asset from the original supplier for a consideration the amount or value of which is more than the market value of the asset; (iii) disposing of any asset to the original supplier for no consideration or for a consideration the amount or value of which is less than the market value of the asset; or (b) where the receipt of the original value was within paragraph 49(1)(d), by reason of an event the effect of which is to reverse the event which constituted the receipt of the original value.

.

• (4) After that sub-paragraph insert—

(3A) For the purposes of sub-paragraph (3)(a)(i), the following are excepted payments— (a) any payment for any goods, services or facilities, provided (whether in the course of a trade or otherwise) by— (i) the original supplier, or (ii) any other person who, at any time in the period of restriction relating to the relevant shares, is an associate of, or connected with, that supplier (whether or not he is such an associate, or so connected, at the material time), which is reasonable in relation to the market value of those goods, services or facilities; (b) any payment of any interest which represents no more than a reasonable commercial return on money lent to— (i) the original recipient, or (ii) any other person who, at any time in the period of restriction relating to the relevant shares, is an associate of, or connected with, that recipient (whether or not he is such an associate, or so connected, at the material time); (c) any payment, as rent for any property occupied by— (i) that recipient, or (ii) any person who, at any time in the period of restriction relating to the relevant shares, is an associate of, or connected with, that recipient (whether or not he is such an associate, or so connected, at the material time), of an amount not exceeding a reasonable and commercial rent for the property; (d) any payment within paragraph (c), (d) or (f) of the definition of “qualifying payment” in paragraph 49(5); and (e) any payment for shares in or securities of any company in circumstances that do not fall within sub-paragraph (3)(a)(ii).

.

• (5) For sub-paragraph (4) of that paragraph (calculation of amounts of original and replacement value) substitute—

(4) For the purposes of this paragraph, the amount of the replacement value is— (a) in a case within paragraph (a) of sub-paragraph (3), the aggregate of— (i) the amount of any payment within sub-paragraph (i) of that paragraph, and (ii) the difference between the market value of any asset to which sub-paragraph (ii) or (iii) of that paragraph applies and the amount or value of the consideration (if any) received for it, and (b) in a case within sub-paragraph (3)(b), the amount of the original value, and paragraph 50 shall apply for the purposes of determining the amount of the original value.

.

• (6) The amendment made by sub-paragraph (1) shall be deemed always to have had effect.

• (7) Subject to that, the amendments made by this paragraph have effect—

• (a) in relation to shares issued on or after 7th March 2001, and

• (b) in relation to shares issued after 31st March 2000 but before 7th March 2001, in respect of value received (within the meaning of paragraph 49 of Schedule 15 to the Finance Act 2000 (c. 17)) on or after 7th March 2001.

7

• (1) In paragraph 55 (provision supplementary to paragraph 54), after sub-paragraph (4) insert—

(5) In this paragraph “the original value” and “the replacement value” shall be construed in accordance with paragraph 54.

.

• (2) The amendment made by this paragraph shall be deemed always to have had effect.

Value received by other persons

8

• (1) In paragraph 56 (reduction or withdrawal of investment relief as a result of value received by certain persons), in sub-paragraph (3) (receipts of value which do not result in the withdrawal or reduction of relief), after paragraph (c) insert—

or it would have the effect mentioned in paragraph (a), (b) or (c) were it not a receipt of insignificant value for the purposes of paragraph 47 (value received by the investing company), section 300 of the Taxes Act 1988 or paragraph 13 of Schedule 5B to the 1992 Act, as the case may be

.

• (2) The amendment made by this paragraph has effect—

• (a) in relation to shares issued on or after 7th March 2001, and

• (b) in respect of shares issued after 31st March 2000 but before 7th March 2001, in relation to any repayment (within the meaning of paragraph 57(2) of Schedule 15 to the Finance Act 2000) made on or after 7th March 2001.

Insignificant repayments disregarded

9

• (1) In paragraph 57 (repayments etc. of insignificant amounts disregarded for the purposes of paragraph 56), in sub-paragraph (1) after “remaining” insert “ issued ”.

• (2) In sub-paragraph (3) of that paragraph for “payment” substitute “ repayment ”.

• (3) The amendment made by sub-paragraph (1) has effect—

• (a) in relation to shares issued on or after 7th March 2001, and

• (b) in respect of shares issued after 31st March 2000 but before 7th March 2001, in relation to repayments (within the meaning of paragraph 57(2) of Schedule 15 to the Finance Act 2000) made on or after 7th March 2001.

• (4) The amendment made by sub-paragraph (2) shall be deemed always to have had effect.

SCHEDULE 17

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2

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3

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4

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5

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SCHEDULE 18

1

In section 172(3) of the Capital Allowances Act 2001 (c. 2) (scope of Chapter 14 of Part 2)—

• (a) for “195” substitute “ 195B ”; and

• (b) for “192” substitute “ 192A ”.

2

After section 175 of that Act insert—

(175A) (1) In this Chapter “energy services agreement” means an agreement entered into by an energy services provider (“the energy services provider”) and another person (“the client”) that makes provision, with a view to saving energy or using energy more efficiently, for— (a) the design of plant or machinery, or one or more systems incorporating plant or machinery, (b) obtaining and installing the plant or machinery, (c) the operation of the plant or machinery, (d) the maintenance of the plant or machinery, and (e) the amount of any payments in respect of the operation of the plant or machinery to be linked (wholly or in part) to energy savings or increases in energy efficiency resulting from the provision or operation of the plant or machinery. (2) In this Chapter “energy services provider” means a person carrying on a qualifying activity consisting wholly or mainly in the provision of energy management services.

.

3

In section 176(4) of that Act (treatment of fixture where expenditure incurred by person with interest in relevant land), for “section 177(4)” substitute “ sections 177(4) and 180A(4) ”.

4

After section 180 of that Act insert—

(180A) (1) If— (a) an energy services agreement is entered into, (b) the energy services provider incurs capital expenditure under the agreement on the provision of plant or machinery, (c) the plant or machinery becomes a fixture, (d) at the time the plant or machinery becomes a fixture— (i) the client has an interest in the relevant land, and (ii) the energy services provider does not, (e) the plant or machinery— (i) is not provided for leasing, and (ii) is not provided for use in a dwelling-house, (f) the operation of the plant or machinery is carried out wholly or substantially by the energy services provider or a person connected with him, (g) the energy services provider and the client are not connected persons, and (h) they elect that this section should apply, the energy services provider is to be treated, on and after the time at which he incurs the expenditure, as the owner of the fixture as a result of incurring the expenditure. (2) But if the client would not have been entitled to a section 176 allowance in respect of the expenditure if he had incurred it, subsection (1) does not apply unless the plant or machinery belongs to a class of plant or machinery specified by Treasury order. (3) In subsection (2) a “section 176 allowance” means an allowance to which a person is entitled as a result of section 176. (4) If an election is made under this section, the client is not to be treated under section 176 as the owner of the fixture. (5) An election under this section must be made by notice to the Inland Revenue— (a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends; (b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period. (6) The “relevant chargeable period” means the chargeable period in which the capital expenditure was incurred.

.

5

In section 181(4) of that Act (purchaser of land giving consideration for fixture), for “section 182” substitute “ sections 182 and 182A ”.

6

After section 182 of that Act insert—

(182A) (1) If— (a) after any plant or machinery has become a fixture, a person (“the purchaser”) acquires an interest in the relevant land, (b) that interest was in existence before the purchaser’s acquisition of it, (c) before that acquisition, the plant or machinery was provided under an energy services agreement, and (d) in connection with that acquisition, the purchaser pays a capital sum to discharge the obligations of the client under the energy services agreement, the purchaser is to be treated, on and after the time of the acquisition, as the owner of the fixture as a result of incurring expenditure, consisting of that capital sum, on the provision of the fixture. (2) Subsection (1) does not apply, and is to be treated as never having applied, if, immediately after the time of the acquisition, a person has a prior right in relation to the fixture. (3) Section 181(3) (test for whether person has a prior right) applies for the purposes of subsection (2).

.

7

• (1) Section 188 of that Act (cessation of ownership when person ceases to have qualifying interest) is amended as follows.

• (2) In subsection (1), after paragraph (c) insert—

(ca) section 182A (purchaser of land discharging obligations of client under energy services agreement),

.

• (3) In subsection (3)(a), for “or 182” substitute “ , 182 or 182A ”.

8

After section 192 of that Act insert—

(192A) (1) This section applies if an energy services provider is treated under section 180A as the owner of a fixture. (2) If— (a) the energy services provider at any time assigns his rights under the energy services agreement, or (b) the financial obligations of the client in respect of the fixture under an energy services agreement are at any time discharged (on the payment of a capital sum or otherwise), the energy services provider is to be treated as ceasing to be the owner of the fixture at that time (or, as the case may be, the earliest of those times). (3) The reference in subsection (2)(b) to the client is, in a case where the financial obligations of the client have become vested in another person (by assignment, operation of law or otherwise), a reference to the person in whom the obligations are vested when the capital sum is paid.

.

9

After section 195 of that Act insert—

(195A) (1) If section 192A(2)(a) applies (cessation of ownership of energy services provider as a result of assignment), the assignee is to be treated, on and after the assignment— (a) as having incurred expenditure, consisting of the consideration given by him for the assignment, on the provision of the fixture, and (b) as being the owner of the fixture. (2) For the purposes of section 192A (and subsection (1) and section 195B) the assignee is to be treated as being an energy services provider who owns the fixture under section 180A. (195B) (1) If section 192A(2)(b) applies (discharge of obligations of client) because the client has paid a capital sum, the client is to be treated— (a) as having incurred expenditure, consisting of the capital sum, on the provision of the fixture, and (b) as being, on and after the time of payment, the owner of the fixture. (2) Section 192A(3) (assignee of client) applies in relation to subsection (1).

.

10

• (1) Section 196 of that Act (disposal values in relation to fixtures) is amended as follows.

• (2) In subsection (1), in the Table, after item 8 insert—

8A. Cessation of ownership of the fixture because section 192A(2)(a) (assignment of rights) applies.	The consideration given by the assignee for the assignment.
8B. Cessation of ownership of the fixture because section 192A(2)(b) (discharge of client’s obligations) applies on the payment of a capital sum.	The capital sum paid to discharge the financial obligations of the client.

• (3) After subsection (4) insert—

(4A) Section 192A(3) (assignee of client) applies in relation to item 8B of the Table.

.

• (4) In subsection (5), for “192” substitute “ 192A ”.

11

In section 203(2)(b) of that Act (reasons for amendment of returns), after “182(2)” insert “ , 182A(2) ”.

SCHEDULE 19

Part 1 — NEW PART 4A OF THE CAPITAL ALLOWANCES ACT 2001

After Part 4 of the Capital Allowances Act 2001 (c. 2) insert—

Part 2 — CONSEQUENTIAL AMENDMENTS

1

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2

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3

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4

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6

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7

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8

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SCHEDULE 20

Part 1 — CHARGEABLE PERIODS ENDING BEFORE 1ST OR 6TH APRIL 2001

Writing-down allowances: infrastructure from UK or non-UK oil fields

1

In Chapter 7 of Part 2 of the Capital Allowances Act 1990 (c. 1) (machinery and plant: miscellaneous expenditure), after section 62 insert—

(62AA) (1) This section applies where— (a) a person carrying on a trade of oil extraction incurs decommissioning expenditure, and (b) the machinery or plant concerned— (i) has been brought into use for the purposes of the trade, and (ii) is, or was when last in use for those purposes, offshore infrastructure. (2) In this section— - “decommissioning expenditure” has the meaning given by section 62AB; - “offshore infrastructure” has the meaning given by section 62AC. (3) The person’s qualifying expenditure for the chargeable period in which the decommissioning expenditure is incurred is treated for the purposes of sections 24 and 25 as increased by the amount of the decommissioning expenditure. (4) Subsection (3) above is subject to subsections (5) and (6) below and section 62A(4A). (5) Subsection (3) above does not apply to decommissioning expenditure on UK infrastructure unless it is incurred in connection with measures taken, wholly or substantially, in order to comply with— (a) an abandonment programme within the meaning given by section 29 of the Petroleum Act 1998 (c. 17), or (b) any condition to which the approval of such a programme is subject. (6) Subsection (3) above does not apply to expenditure in respect of which an allowance or deduction could be made apart from that subsection in taxing, or computing, the person’s income for any purpose of income tax or corporation tax. (7) For the purposes of subsection (5) above, decommissioning expenditure is “on UK infrastructure” if the machinery or plant concerned— (a) is offshore infrastructure within section 62AC(1)(a) or (c), or (b) is not offshore infrastructure but was offshore infrastructure within section 62AC(1)(a) or (c) when last in use for the purposes of the trade. (62AB) (1) In section 62AA “decommissioning expenditure” means expenditure in connection with— (a) preserving machinery or plant pending its reuse or demolition, (b) preparing machinery or plant for reuse, (c) arranging for the reuse of machinery or plant, or (d) demolishing machinery or plant. (2) It is immaterial for the purposes of subsection (1)(a) above whether the machinery or plant is reused, is demolished or is partly reused and partly demolished. (3) It is immaterial for the purposes of subsection (1)(b) and (c) above whether the machinery or plant is in fact reused. (62AC) (1) In section 62AA “offshore infrastructure” means— (a) an offshore installation within the meaning given by section 44 of the Petroleum Act 1998 or a part of such an installation, or (b) something that would be, or would be a part of, an offshore installation within that meaning if in subsection (3) of that section “relevant waters” meant waters in a foreign sector of the continental shelf and other foreign tidal waters, or (c) a pipeline within the meaning of section 26 of that Act, or a part of such a pipeline, that is in, under or over waters in— (i) the territorial sea adjacent to the United Kingdom, or (ii) an area designated under section 1(7) of the Continental Shelf Act 1964 (c. 29), or (d) a pipeline within the meaning of section 26 of the Petroleum Act 1998 (c. 17), or a part of such a pipeline, that is in, under or over waters in a foreign sector of the continental shelf. (2) In subsection (1)(b) and (d) above— - “foreign sector of the continental shelf” means an area within which rights are exercisable with respect to the sea bed and subsoil and their natural resources by a country or territory outside the United Kingdom; - “foreign tidal waters” means tidal waters in an area within which rights are exercisable with respect to the bed and subsoil of the body of water in question and their natural resources by a country or territory outside the United Kingdom.

.

Ring fence trades: special allowance for pre-cessation abandonment expenditure

2

• (1) Section 62A of the Capital Allowances Act 1990 (c. 1) (special allowance for costs of demolition of offshore machinery or plant) is amended as follows.

• (2) In subsection (1) (section applies to expenditure that would otherwise fall within section 62(1)(b)), after “section 62(1)(b)” insert “ or 62AA(3) ”.

• (3) In subsection (1)(c)—

• (a) for “the demolition of” substitute “ decommissioning ”; and

• (b) after “which is or forms part of” insert “ , or when last in use for the purposes of the trade was or formed part of, ”.

• (4) In subsection (3)(a), for “demolition” (in both places) substitute “ decommissioning ”.

• (5) After subsection (3) insert—