Finance Act 2001

(3A) In this section “decommissioning”, in relation to any machinery or plant, means— (a) demolishing the machinery or plant, (b) preserving the machinery or plant pending its reuse or demolition, (c) preparing the machinery or plant for reuse, or (d) arranging for the reuse of the machinery or plant. (3B) For the purposes of this section— (a) in determining whether expenditure is incurred on preserving machinery or plant pending its reuse or demolition, it is immaterial whether the machinery or plant is reused, is demolished or is partly reused and partly demolished; and (b) in determining whether expenditure is incurred on preparing machinery or plant for reuse, or on arranging for the reuse of machinery or plant, it is immaterial whether the machinery or plant is in fact reused.

.

• (6) For subsection (4) (entitlement to special allowance) substitute—

(4) If the person incurring any abandonment expenditure so elects, for the chargeable period in which that expenditure is incurred there shall be made to that person an allowance equal to so much of the abandonment expenditure to which the election relates as is incurred in that period. (4A) If a person makes such an election, neither of sections 62(1)(b) and 62AA(3) applies. (4B) If machinery or plant is demolished, the total of any allowances under subsection (4) above in respect of expenditure on the decommissioning of the machinery or plant is reduced by the amount of any moneys received for the remains of the machinery or plant. (4C) Effect is given to subsection (4B) above by setting the amount (until wholly utilised)— - first, against any allowance under subsection (4) above for the chargeable period in which the amount is received (as previously reduced in giving effect to subsection (4B)); - second, against allowances under that subsection for earlier chargeable periods (as so reduced and taking later such periods before earlier ones); and - third, against allowances under that subsection for later chargeable periods (as so reduced and taking earlier such periods before later ones).

.

• (7) In subsection (5)(a) (election must specify amounts received for remains), for “subsection (4)(a)” substitute “ subsection (4B) ”.

• (8) In the sidenote, for “demolition” substitute “ decommissioning ”.

Ring fence trades: allowances for post-cessation expenditure

3

• (1) Section 62B of the Capital Allowances Act 1990 (c. 1) (abandonment expenditure incurred within 3 years of ceasing ring fence trade) is amended as follows.

• (2) In subsection (1)(b) (section applies where expenditure incurred within 3 years of ceasing trade), for “the demolition of” substitute “ decommissioning ”.

• (3) In subsection (1)(c) (section applies where expenditure would have been abandonment expenditure under section 62A if incurred earlier), for “demolition” substitute “ decommissioning ”.

• (4) In subsection (2) (expenditure net of receipts for remains is eligible for allowances), for “the machinery or plant referred to in that paragraph” substitute “ any of the machinery or plant referred to in that paragraph on whose demolition any of the post-cessation expenditure was incurred ”.

Commencement of Part 1

4

• (1) The amendments made by this Part of this Schedule apply to expenditure that is incurred—

• (a) on or after 7th August 2000, and

• (b) in a relevant chargeable period.

• (2) The amendments made by paragraph 1 also apply to expenditure incurred before 7th August 2000 if the expenditure—

• (a) is incurred in a relevant chargeable period, and

• (b) is within sub-paragraph (3) or (4).

• (3) Expenditure is within this sub-paragraph if—

• (a) it is decommissioning expenditure on UK infrastructure, and

• (b) it is incurred in connection with an abandonment programme approved on or after 7th August 2000.

• (4) Expenditure is within this sub-paragraph if—

• (a) it is decommissioning expenditure,

• (b) it is not decommissioning expenditure on UK infrastructure, and

• (c) it is incurred in connection with a decommissioning activity that takes place on or after 7th August 2000.

• (5) The amendments made by paragraphs 2 and 3 also apply to expenditure incurred before 7th August 2000 if the expenditure—

• (a) is incurred in a relevant chargeable period, and

• (b) is incurred in connection with an abandonment programme approved on or after 7th August 2000.

• (6) In sub-paragraphs (3) and (4), “decommissioning expenditure” and “decommissioning expenditure on UK infrastructure” have the same meaning as in the section 62AA inserted by paragraph 1.

• (7) In sub-paragraph (4)(c) “decommissioning activity” means an activity mentioned in any of paragraphs (a) to (d) of the section 62AB(1) inserted by paragraph 1.

• (8) In this paragraph “relevant chargeable period” means—

• (a) for income tax purposes, a chargeable period ending before 6th April 2001, and

• (b) for corporation tax purposes, a chargeable period ending before 1st April 2001.

Part 2 — CHARGEABLE PERIODS ENDING ON OR AFTER 1ST OR 6TH APRIL 2001

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

5

• (1) In Chapter 13 of Part 2 of the Capital Allowances Act 2001 (c. 2) (plant and machinery allowances: provisions affecting mining and oil industries), after section 161 insert—

(161A) (1) In sections 161C and 161D “offshore infrastructure” means— (a) an offshore installation within the meaning given by section 44 of the Petroleum Act 1998 (c. 17) 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)— - “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. (161B) (1) In sections 161C and 161D “decommissioning expenditure” means expenditure in connection with— (a) preserving plant or machinery pending its reuse or demolition, (b) preparing plant or machinery for reuse, or (c) arranging for the reuse of plant or machinery. (2) It is immaterial for the purposes of subsection (1)(a) whether the plant or machinery is reused, is demolished or is partly reused and partly demolished. (3) It is immaterial for the purposes of subsection (1)(b) and (c) whether the plant or machinery is in fact reused. (161C) (1) This section applies where— (a) a person carrying on a trade of oil extraction incurs decommissioning expenditure, and (b) the plant or machinery 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) The decommissioning expenditure is allocated to the appropriate pool for the chargeable period in which it is incurred. (3) Subsection (2) is subject to sections 161D and 164(4). (4) In subsection (2) “the appropriate pool” means the pool to which the expenditure on the plant or machinery concerned has been or would be allocated in accordance with this Part. (161D) (1) Subsection (2) of section 161C 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. (2) Subsection (2) of section 161C 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 tax purpose. (3) For the purposes of subsection (1), decommissioning expenditure is “on UK infrastructure” if the plant or machinery concerned— (a) is offshore infrastructure within section 161A(1)(a) or (c), or (b) is not offshore infrastructure but was offshore infrastructure within section 161A(1)(a) or (c) when last in use for the purposes of the trade.

.

• (2) In section 57(2) of the Capital Allowances Act 2001 (c. 2) (available qualifying expenditure in pool includes amounts allocated to pool under specified provisions), before the entry for section 165(3) insert—

• section 161C(2) (decommissioning expenditure incurred by person carrying on trade of oil extraction);

.

Ring fence trades: meaning of “abandonment expenditure”

6

• (1) Section 163 of the Capital Allowances Act 2001 (c. 2) (meaning of “abandonment expenditure”) is amended as follows.

• (2) In subsection (2)(b), for “the demolition of” substitute “ decommissioning ”.

• (3) In subsection (2)(b)(ii), at the end insert “ or which, when last in use for the purposes of a ring-fence trade, was, or formed part of, such an installation or pipeline. ”.

• (4) In subsection (3), for “demolition” substitute “ decommissioning ”.

• (5) After subsection (4) insert—

(4A) In this section “decommissioning”, in relation to any plant or machinery, means— (a) demolishing the plant or machinery, (b) preserving the plant or machinery pending its reuse or demolition, (c) preparing the plant or machinery for reuse, or (d) arranging for the reuse of the plant or machinery. (4B) In determining whether expenditure is incurred on preserving plant or machinery pending its reuse or demolition, it is immaterial whether the plant or machinery is reused, is demolished or is partly reused and partly demolished. (4C) In determining whether expenditure is incurred on preparing plant or machinery for reuse, or on arranging for the reuse of plant or machinery, it is immaterial whether the plant or machinery is in fact reused.

.

Ring fence trades: special allowance for pre-cessation expenditure

7

• (1) Section 164 of the Capital Allowances Act 2001 (c. 2) (abandonment expenditure incurred before cessation of ring fence trade) is amended as follows.

• (2) In subsection (1) (person carrying on ring-fence trade may elect for special allowance if he incurs abandonment expenditure), after “incurs abandonment expenditure,” insert. “ and the plant or machinery concerned has been brought into use for the purposes of that trade, ”

• (3) For paragraph (b) of subsection (3) (election must specify amounts received for remains of demolished plant or machinery) substitute—

(b) where the plant or machinery concerned has been or is to be demolished, any amounts received for its remains.

.

• (4) In subsection (4)(a) (entitlement to special allowance), the words “, of an amount equal to the net abandonment cost,” are omitted.

• (5) For paragraph (b) of subsection (4) (section 26(3) does not apply where election made) substitute—

(b) neither of sections 26(3) and 161C(2) (net cost of demolition where plant or machinery not replaced, or cost of preparing for reuse, added to existing pool) applies.

.

• (6) For subsection (5) (meaning of “net abandonment cost”) substitute—

(5) The amount of the special allowance for a chargeable period is equal to so much of the abandonment expenditure to which the election relates as is incurred in that period. (6) If plant or machinery is demolished, the total of any special allowances in respect of expenditure on decommissioning the plant or machinery is reduced by any amount received for the remains of the plant or machinery. Here “decommissioning” has the meaning given by section 163(4A). (7) Effect is given to subsection (6) by setting the amount (until wholly utilised)— - first, against any special allowance for the chargeable period in which the amount is received (as previously reduced in giving effect to subsection (6)); - second, against special allowances for earlier chargeable periods (as so reduced and taking later such periods before earlier ones); and - third, against special allowances for later chargeable periods (as so reduced and taking earlier such periods before later ones).

Ring fence trades: allowances for post-cessation expenditure

8

• (1) Section 165 of the Capital Allowances Act 2001 (c. 2) (abandonment expenditure incurred within 3 years of ceasing ring fence trade) is amended as follows.

• (2) In subsection (1)(b) (section applies where abandonment expenditure incurred within 3 years of ceasing trade), the words “on the demolition of plant or machinery” are omitted.

• (3) In subsection (3)(b) (amounts received for remains of plant or machinery are not taxable income), before “any amount received” insert “ where any of the abandonment expenditure was incurred on the demolition of plant or machinery, ”.

• (4) In subsection (4), in the definition of “the relevant abandonment cost”, for “the plant or machinery” substitute “ any plant or machinery on whose demolition any of the abandonment expenditure was incurred ”.

Commencement of Part 2

9

• (1) The amendments made by this Part of this Schedule (but see sub-paragraph (9)) apply to expenditure that is incurred—

• (a) on or after 7th August 2000, and

• (b) in a relevant chargeable period.

• (2) The amendments made by paragraph 5 also apply to expenditure incurred before 7th August 2000 if the expenditure—

• (a) is incurred in a relevant chargeable period, and

• (b) is within sub-paragraph (3) or (4).

• (3) Expenditure is within this sub-paragraph if—

• (a) it is decommissioning expenditure on UK infrastructure, and

• (b) it is incurred in connection with an abandonment programme approved on or after 7th August 2000.

• (4) Expenditure is within this sub-paragraph if—

• (a) it is decommissioning expenditure,

• (b) it is not decommissioning expenditure on UK infrastructure, and

• (c) it is incurred in connection with a decommissioning activity that takes place on or after 7th August 2000.

• (5) The amendments made by paragraphs 6 to 8 (but see sub-paragraph (9)) also apply to expenditure incurred before 7th August 2000 if the expenditure—

• (a) is incurred in a relevant chargeable period, and

• (b) is incurred in connection with an abandonment programme approved on or after 7th August 2000.

• (6) In sub-paragraphs (3) and (4), “decommissioning expenditure” and “decommissioning expenditure on UK infrastructure” have the same meaning as in the sections 161C and 161D inserted by paragraph 5.

• (7) In sub-paragraph (4)(c) “decommissioning activity” means an activity mentioned in any of paragraphs (a) to (c) of the section 161B(1) inserted by paragraph 5.

• (8) In this paragraph “relevant chargeable period” means—

• (a) for income tax purposes, a chargeable period ending on or after 6th April 2001, and

• (b) for corporation tax purposes, a chargeable period ending on or after 1st April 2001.

• (9) Sub-paragraphs (1) to (8) do not apply to the amendments made by paragraphs 7(2) and 8(2).

Those amendments shall be deemed always to have had effect.

SCHEDULE 21

Thermal insulation of industrial buildings

1

In section 28(2) of the Capital Allowances Act 2001 (c. 2) (expenditure on thermal insulation of industrial buildings), after “ordinary Schedule A business” insert “ or an overseas property business ”.

Fixtures: purchasers of land and incoming lessees

2

• (1) In section 181 of that Act (purchaser of land giving consideration for fixture), for subsection (2) substitute—

(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.

.

• (2) In section 181(3) of that Act—

• (a) for “subsection (2)(b), the person holding the other interest” substitute “ subsection (2), a person ”; and

• (b) for “subsection (2)(a)” substitute “ subsection (2) ”.

• (3) In section 182 of that Act (purchaser of land discharging obligations of equipment lessee), for subsections (2) and (3) substitute—

(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).

.

• (4) In section 184 of that Act (incoming lessee where lessor not entitled to allowances), for subsections (2) and (3) substitute—

(2) Subsection (1) does not apply, and is to be treated as never having applied, if, immediately after the time when the lease is granted, 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).

.

Meaning of “sale and finance leaseback”

3

In section 221(1) of that Act (meaning of “sale and finance leaseback”), in paragraph (b)(iii), for “any person” substitute “ S or by a person (other than B) who is connected with S ”.

Effect of partnership changes

4

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

• (2) In section 558 of that Act (effect of partnership changes for the purpose of other allowances), in subsection (1), for paragraph (c) substitute—

(c) the change does not result in the relevant activity being treated as permanently discontinued under section 113(1) or 337(1) of ICTA (changes in persons carrying on a trade etc. and effect of company ceasing to trade etc.).

Enterprise zones

5

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

Highway concessions

6

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

SCHEDULE 22

Part 1 — DEDUCTION FOR CAPITAL EXPENDITURE

Deduction for capital expenditure

1

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

Qualifying land remediation expenditure

2

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

Land in a contaminated state

3

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

Relevant land remediation

4

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

Employee costs

5

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

Expenditure on materials

6

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

Expenditure incurred because of contamination

7

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

Subsidised expenditure

8

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

Qualifying expenditure on sub-contracted land remediation

9

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

Treatment of expenditure where company and sub-contractor are connected persons

10

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

Treatment of sub-contractor payment in other cases

11

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

Part 2 — ENTITLEMENT TO LAND REMEDIATION RELIEF

Entitlement to relief

12

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

Part 3 — MANNER OF GIVING EFFECT TO RELIEF

Deduction in computing profits of Schedule A business or trade

13

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

Entitlement to land remediation tax credit

14

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

Amount of land remediation tax credit

15

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

Payment in respect of land remediation tax credit

16

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

Restriction on losses carried forward

17

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

Tax credit not income

18

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

Certain qualifying land remediation expenditure excluded for purposes of capital gains

19

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

Part 4 — SPECIAL PROVISION FOR LIFE ASSURANCE BUSINESS

Limitation on relief

20

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

Provision in respect of “I minus E” basis

21

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

Entitlement to relief: “I minus E” basis

22

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

Giving effect to relief: enhanced expenses of management

23

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

Entitlement to life assurance company tax credit

24

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

Amount of life assurance company tax credit

25

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

Payment in respect of life assurance company tax credit, etc

26

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

Restriction on carrying forward expenses of management

27

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

Certain qualifying expenditure excluded for purposes of capital gains

28

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

Part 5 — SUPPLEMENTARY PROVISIONS

Artificially inflated claims for deduction, relief or tax credit

29

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

Funding of tax credits

30

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

Interpretation

31

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

Transitional provisions

32

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

SCHEDULE 23

Computation under Schedule A

1

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

Computation of profits of insurance companies

2

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

Interest

3

• (1) Section 826 of the Taxes Act 1988 (interest on tax overpaid) is amended as follows.

• (2) In subsection (1) (payments which carry interest) after paragraph (d) insert—

; or (e) a payment of land remediation tax credit or life assurance company tax credit falls to be made to a company under Schedule 22 to the Finance Act 2001 in respect of an accounting period,

.

• (3) After subsection (3A) (material date for payments of R&D tax credits) insert—

(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.

.

• (4) In subsection (8A) (recovery of overpaid interest)—

• (a) in paragraph (a), after “subsection (1)(a) or (d)” insert “ or (e) ”, and

• (b) in paragraph (b)(ii), after “R&D tax credit” insert “ , land remediation tax credit or life assurance company tax credit ”.

• (5) In subsection (8BA) (cases where there is change in amount of tax credit)—

• (a) after “amount of the R&D tax credit” insert “ , the land remediation tax credit or the life assurance company tax credit ”, and

• (b) after “amount of R&D tax credit” insert “ , land remediation tax credit or life assurance company tax credit ”.

Claim must be made in tax return

4

In Schedule 18 to the Finance Act 1998 (c. 36) (company tax returns, assessments and related matters), in paragraph 10 (other claims and elections to be included in return), after sub-paragraph (2) insert—

(2A) A claim to which Part 9B of this Schedule applies (claims for land remediation tax credit and life assurance company tax credit) can only be made by being included in a company tax return (see paragraph 83H).

.

Recovery of excessive tax credit

5

In paragraph 52 of that Schedule (recovery of excessive repayments, etc.)—

• (a) in sub-paragraph (2) (excessive repayments to which paragraphs 41 to 48 apply), before “or” at the end of paragraph (ba) insert—

(bb) land remediation tax credit or life assurance company tax credit under Schedule 22 to the Finance Act 2001,

;

• (b) in that sub-paragraph, in paragraph (c) (interest paid under section 826 of the Taxes Act 1988) for “that Act” substitute “ the Taxes Act 1988 ”;

• (c) in sub-paragraph (5) (connection of assessment for excessive payment to an accounting period), before “or” at the end of paragraph (ab) insert—

(ac) an amount of land remediation tax credit or life assurance company tax credit paid to a company for an accounting period,

;

and

• (d) at the end of that sub-paragraph after “(ab)” insert “ , (ac) ”.

Claims relating to remediation of contaminated land

6

After Part 9A of that Schedule (claims for R&D tax credits) insert—

(83G) This Part of this Schedule applies to claims for— (a) land remediation tax credits under paragraph 14 of Schedule 22 to the Finance Act 2001 (“land remediation tax credits”), and (b) life assurance company tax credits under paragraph 24 of that Schedule (“life assurance company tax credits”). (83H) (1) A claim for a land remediation tax credit or a life assurance company tax credit must be made by being included in the claimant company’s company tax return for the accounting period for which the claim is made. (2) It may be included in the return originally made or by amendment. (83I) A claim for a land remediation tax credit or a life assurance company tax credit must specify the amount of the tax credit claimed, which must be an amount quantified at the time the claim is made. (83J) A claim for a land remediation tax credit or a life assurance company tax credit may be amended or withdrawn by the claimant company only by amending its company tax return. (83K) (1) A claim for a land remediation tax credit or a life assurance company tax credit may be made, amended or withdrawn at any time up to the first anniversary of the filing date for the company tax return of the claimant company for the accounting period for which the claim is made. (2) The claim may be made, amended or withdrawn at a later date if the Inland Revenue allow it. (83L) (1) The company is liable to a penalty where it— (a) fraudulently or negligently makes a claim for a land remediation tax credit or a life assurance company tax credit and that claim is incorrect, or (b) discovers that such a claim made by it (neither fraudulently nor negligently) is incorrect and does not remedy the error without unreasonable delay. (2) The penalty is an amount not exceeding the excess land remediation tax credit or excess life assurance company tax credit claimed, that is, the difference between— (a) the amount of the land remediation tax credit or the life assurance company tax credit claimed by the company for the accounting period to which the claim relates, and (b) the amount of the land remediation tax credit or the life assurance company tax credit to which the company is entitled for that period.

.

SCHEDULE 24

Part 1 — NEW SCHEDULE 4A TO THE TAXES ACT 1988

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

Part 2 — CONSEQUENTIAL AMENDMENTS

2

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

3

• (1) In Schedule 1B to that Act (claims for relief involving two or more years), in paragraph 1 (preliminary definitions) for sub-paragraphs (2) and (3) substitute—

(2) For the purposes of this Schedule, two or more claims made by the same person are associated with each other if each of them is any of the following— (a) a claim to which this Schedule applies, or (b) a claim to which Schedule 4A to the principal Act applies (creative artists: relief for fluctuating profits), and the same year of assessment is the earlier year in relation to each of those claims. (3) In sub-paragraph (2) above, any reference to claims includes— (a) in the case of a claim to which this Schedule applies, a reference to amendments and revocations to which paragraph 4 below applies; (b) in the case of a claim to which Schedule 4A to the principal Act applies, a reference to amendments and revocations to which paragraph 9 of that Schedule applies.

.

• (2) This paragraph applies for the year 2000-01 and subsequent years of assessment.

4

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

SCHEDULE 25

Meaning of “investment LLP” and “property investment LLP”

1

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

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

• (3) In section 288(1) of the Taxation of Chargeable Gains Act 1992 (c. 12) (interpretation), at the appropriate place insert—

“property investment LLP” has the meaning given by section 842B of the Taxes Act;

.

Pension funds, &c.: exclusion of exemptions from tax in case of income from property investment LLPs

2

In Chapter 6 of Part 14 of the Taxes Act 1988 (pension schemes, &c.: miscellaneous provisions), after section 659D insert—

(659E) (1) The exemptions specified below do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP. (2) The exemptions are those provided by— - section 592(2) (exempt approved schemes), - section 608(2)(a) (former approved superannuation funds), - section 613(4) (Parliamentary pension funds), - section 614(3) (certain colonial, &c. pension funds), - section 614(4) (the Overseas Service Pension Fund), - section 614(5) (other pension funds for overseas employees), - section 620(6) (retirement annuity trust schemes), and - section 643(2) (approved personal pension schemes). (3) The income to which subsection (1) above applies includes relevant stock lending fees, in relation to any investments, to which any of the provisions listed in subsection (2) above would apply by virtue of section 129B. (4) Section 659A (treatment of futures and options) applies for the purposes of subsection (1) above.

.

Pension funds, &c.: exclusion of exemption from trusts rate in case of income from property investment LLPs

3

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

Pension funds, &c.: exclusion of exemptions in case of gains from property investment LLPs

4

In section 271 of the Taxation of Chargeable Gains Act 1992 (c. 12) (miscellaneous exemptions), after subsection (11) insert—

(12) Subsection (1)(b), (c), (d), (g) and (h) and subsection (2) above do not apply to gains accruing to a person from the acquisition and disposal by him of assets held as a member of a property investment LLP.

.

Insurance companies: treatment of income or gains arising from property investment LLP

5

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

Insurance companies: double taxation relief

6

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

Insurance companies: capital allowances

7

In section 545 of the Capital Allowances Act 2001 (c. 2) (life assurance business: investment assets), for subsection (3) substitute—

(3) Any allowance under this Act in respect of an investment asset shall be treated as referable to the category or categories of business to which income arising from the asset is or would be referable. If income so arising is or would be referable to more than one category of business, the allowance shall be apportioned in accordance with sections 432ZA to 432E, or section 438B, of ICTA in the same way as the income.

.

Friendly societies: exclusion of exemptions from tax

8

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

Exclusion of relief on loans to buy into investment LLP

9

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

SCHEDULE 26

Introductory

1

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

Conditions for assets other than shares to qualify as business assets

2

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

Companies which are qualifying companies

3

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

Meaning of “material interest”

4

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

Interpretation of Schedule A1

5

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

Qualifying shareholdings in joint venture companies

6

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

Joint enterprise companies: relevant connection

7

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

SCHEDULE 27

Computation of income subject to foreign tax

1

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

Restriction of relief for underlying tax

2

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

Credit for underlying tax: UK company related through overseas company

3

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

Dividends that give rise to eligible unrelieved foreign tax

4

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

The amounts that are eligible unrelieved foreign tax

5

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

Underlying tax excluded from claim not to be allowed under section 811

6

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

Relief for non-resident persons with branches or agencies in the UK

7

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

SCHEDULE 28

Part 1 — ASSIGNMENT OR SURRENDER OF PART OF THE RIGHTS

Introductory

1

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

Interpretation

2

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

Life policies: chargeable events

3

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

Life policies: computation of gain

4

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

Life annuity contracts: chargeable events

5

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

Life annuity contracts: computation of gain

6

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

Capital redemption policies: chargeable events

7

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

The value of a part or share assigned

8

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

Assignments etc involving co-ownership

9

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

Charging tax in respect of certain section 546 excesses

10

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

Method of charging gain to tax

11

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

Method of charging gain to tax: multiple interests

12

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

Corresponding deficiency relief

13

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

Relief where gain charged at higher rate

14

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

Right of individual to recover tax from trustees

15

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

Right of company to recover tax from trustees

16

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

Non-resident policies and off-shore capital redemption policies

17

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

Part 2 — PROVISION OF INFORMATION BY INSURERS

Information: duty of insurers

18

For section 552 of the Taxes Act 1988 substitute—

(552) (1) Where a chargeable event within the meaning of this Chapter has happened in relation to any policy or contract, the body by or with whom the policy or contract was issued, entered into or effected shall— (a) unless satisfied that no gain is to be treated as arising by reason of the event, deliver to the appropriate policy holder before the end of the relevant three month period a certificate specifying the information described in subsection (5) below; and (b) if the condition in paragraph (a) or (b) of subsection (2) below is satisfied, deliver to the inspector before the end of the relevant three month period a certificate specifying the information described in subsection (5) below together with the name and address of the appropriate policy holder. (2) For the purposes of this section— (a) the condition in this paragraph is that the event is an assignment for money or money’s worth of the whole of the rights conferred by the policy or contract; or (b) the condition in this paragraph is that the amount of the gain, or the aggregate amount of the gain and any gains connected with it, exceeds one half of the basic rate limit for the relevant year of assessment. (3) If, in the case of every certificate which a body delivers under subsection (1)(a) above which relates to a gain attributable to a year of assessment (or, where the appropriate policy holder is a company, the corresponding financial year), the body also delivers to the inspector— (a) before the end of the relevant three month period for the purposes of subsection (1)(b) above, (b) by a means prescribed by the Board for the purposes of this subsection under section 552ZA(5), and (c) in a form so prescribed in the case of that means, a certificate specifying the same information as the certificate under subsection (1)(a) together with the name and address of the appropriate policy holder, the body shall be taken to have complied with the requirements of subsection (1)(b) above in relation to that year of assessment, and the corresponding financial year, so far as relating to the chargeable events to which the certificates relate. (4) Where a certificate is not required to be delivered under subsection (1)(b) above in the case of any chargeable event— (a) the inspector may by notice require the body to deliver to him a copy of any certificate that the body was required to deliver under subsection (1)(a) above which relates to the chargeable event; and (b) it shall be the duty of the body to deliver such a copy within 30 days of receipt of the notice. (5) The information to be given to the appropriate policy holder pursuant to subsection (1)(a) above or the inspector pursuant to subsection (1)(b) above is— (a) any unique identifying designation given to the policy or contract; (b) the nature of the chargeable event and— (i) the date on which it happened; and (ii) if it is a chargeable event by virtue of section 546C(7)(a), the date on which the year ends; (c) if the event is the assignment of all the rights conferred by the policy or contract, such of the following as may be required for computing the amount of the gain to be treated as arising by virtue of this Chapter— (i) the amount or value of any relevant capital payments; (ii) the amounts previously paid under the policy or contract by way of premiums or otherwise by way of consideration for an annuity; (iii) the capital element in any payment previously made on account of an annuity; (iv) the value of any previously assigned parts of or shares in the rights conferred by the policy or contract; (v) the total of the amounts of gains treated as arising on previous chargeable events by reason, or in consequence, of the occurrence of a section 546 excess at the end of a year; (d) except where paragraph (c) above applies, the amount of the gain treated as arising by reason of the event; (e) the number of years relevant for computing the appropriate fraction of the gain for the purposes of section 550(3), apart from section 553(8); (f) on the assumption that section 547(1)(a) has effect in relation to the gain— (i) whether an individual would fall to be treated as having paid income tax at the basic rate on the amount of the gain in accordance with section 547(5)(a); and (ii) if so, except in a case where paragraph (c) above applies, the amount of such tax that would fall to be so treated as paid. (6) For the purposes of subsection (1)(a) above, the relevant three month period is whichever of the following periods ends the latest— (a) the period of three months following the happening of the chargeable event; (b) if the event is a surrender or assignment which is a chargeable event by virtue of section 546C(7)(a), the period of three months following the end of the year in which the event happens; (c) if the event is a death or an assignment of the whole of the rights or a surrender or assignment which is a chargeable event by virtue of section 546C(7)(a), the period of three months beginning with receipt of written notification of the event. (7) For the purposes of subsection (1)(b) above, the relevant three month period is whichever of the following periods ends the latest— (a) the period of three months following the end of the year of assessment, or, where the policy holder is a company, the financial year, in which the event happened; (b) if the event is a surrender or assignment which is a chargeable event by virtue of section 546C(7)(a), the period of three months following the end of the year in which the event happens; (c) if the event is a death or an assignment, the period of three months beginning with receipt of written notification of the event; (d) if a certificate under subsection (1)(b) above would not be required in respect of the event apart from the happening of another event, and that other event is one of those mentioned in paragraph (c) above, the period of three months beginning with receipt of written notification of that other event. (8) For the purposes of this section the cases where a gain is connected with another gain are those cases where— (a) both gains arise in connection with policies or contracts containing obligations which, immediately before the chargeable event, were obligations of the same body; (b) the policy holder of those policies or contracts is the same; (c) both gains are attributable to the same year of assessment or, where the policy holder is a company, to the same financial year; (d) the terms of the policies or contracts are the same, apart from any difference in their maturity dates; and (e) the policies or contracts were issued in respect of insurances made, or were entered into or effected, on the same date. (9) For the purposes of this section, the year of assessment or financial year to which a gain is attributable is— (a) in the case of a gain treated as arising by virtue of section 546C(7)(b), the year of assessment or financial year which includes the end of the year as at which the section 546 excess in question occurs; or (b) in any other case, the year of assessment or financial year in which happens the chargeable event by reason of which the gain is treated as arising. (10) In this section— - “amount”, in relation to any gain, means the amount of the gain apart from section 553(3); - “appropriate policy holder” means— 1. in relation to an assignment of part of or a share in the rights conferred by a policy or contract, any person who is both— 1. the policy holder, or one of the policy holders, immediately before the assignment; and 2. the assignor or one of the assignors; and 2. in relation to any other chargeable event, the person who is the policy holder immediately before the happening of the event; - “financial year” means a period of 12 months beginning with 1st April; - “the relevant year of assessment”, in the case of any gain, means— 1. the year of assessment to which the gain is attributable, or 2. if the gain arises to a company, the year of assessment which corresponds to the financial year to which the gain is attributable; - “section 546 excess” has the meaning given in section 546B(4); - “year”, in relation to any policy or contract, has the meaning given by section 546(4). (11) For the purposes of this section a year of assessment and a financial year correspond to each other if the financial year ends with 31st March in the year of assessment. (12) This section is supplemented by section 552ZA. (552ZA) (1) This section supplements section 552 and shall be construed as one with it. (2) Where the obligations under any policy or contract of the body that issued, entered into or effected it (“the original insurer”) are at any time the obligations of another body (“the transferee”) to whom there has been a transfer of the whole or any part of a business previously carried on by the original insurer, section 552 shall have effect in relation to that time, except where the chargeable event— (a) happened before the transfer, and (b) in the case of a death or an assignment, is an event of which the notification mentioned in subsection (6) or (7) of that section was given before the transfer, as if the policy or contract had been issued, entered into or effected by the transferee. (3) Where, in consequence of section 546C(7)(a), paragraph (a) or (b) of section 552(1) requires certificates to be delivered in respect of two or more surrenders, happening in the same year, of part of or a share in the rights conferred by the policy or contract, a single certificate may be delivered under the paragraph in question in respect of all those surrenders (and may treat them as if they together constituted a single surrender) unless between the happening of the first and the happening of the last of them there has been— (a) an assignment of part of or a share in the rights conferred by the policy or contract; or (b) an assignment, otherwise than for money or money’s worth, of the whole of the rights conferred by the policy or contract. (4) Where the appropriate policy holder is two or more persons— (a) section 552(1)(a) requires a certificate to be delivered to each of them; but (b) nothing in section 552 or this section requires a body to deliver a certificate under subsection (1)(a) of that section to any person whose address has not been provided to the body (or to another body, at a time when the obligations under the policy or contract were obligations of that other body). (5) A certificate under section 552(1)(b) or (3)— (a) shall be in a form prescribed for the purpose by the Board; and (b) shall be delivered by any means prescribed for the purpose by the Board; and different forms, or different means of delivery, may be prescribed for different cases or different purposes. (6) The Board may by regulations make such provision as they think fit for securing that they are able— (a) to ascertain whether there has been or is likely to be any contravention of the requirements of section 552 or this section; and (b) to verify any certificate under that section. (7) Regulations under subsection (6) above may include, in particular, provisions requiring persons to whom premiums under any policy are or have at any time been payable— (a) to supply information to the Board; and (b) to make available books, documents and other records for inspection on behalf of the Board. (8) Regulations under subsection (6) above may— (a) make different provision for different cases; and (b) contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.

.

Duties of overseas insurers' tax representatives

19

In section 552B of the Taxes Act 1988, for subsection (2) (which specifies the relevant duties) substitute—

(2) For the purposes of this section “the relevant duties” are— (a) the duties imposed by section 552, (b) the duties imposed by section 552ZA(2), (4) or (5), and (c) any duties imposed by regulations made under subsection (6) of section 552ZA by virtue of subsection (7) of that section, so far as relating to relevant insurances under which the overseas insurer in question has any obligations.

.

Penalties

20

In section 98 of the Taxes Management Act 1970 (c. 9), in the second column of the Table—

• (a) for the entry “section 552(1) to (4);” substitute “ section 552; ”; and

• (b) for the entry “regulations under section 552(4A)” substitute “ regulations under section 552ZA(6); ”.

SCHEDULE 29

Part 1 — AMENDMENT OR CORRECTION OF RETURN

Assessment by Revenue treated as included in return

1

• (1) In section 9(3) of the Taxes Management Act 1970 (personal or trustee return to include self-assessment: assessment on the taxpayer’s behalf) omit the words following the paragraphs.

• (2) After that subsection insert—

(3A) An assessment under subsection (3) above is treated for the purposes of this Act as a self-assessment and as included in the return.

.

Power to amend or correct personal or trustee return

2

• (1) In section 9 of the Taxes Management Act 1970 (personal or trustee return to include self-assessment) omit subsections (4) to (6).

• (2) After that section insert—

(9ZA) (1) A person may amend his return under section 8 or 8A of this Act by notice to an officer of the Board. (2) An amendment may not be made more than twelve months after the filing date. (3) In this section “the filing date” means the day mentioned in section 8(1A) or, as the case may be, section 8A(1A) of this Act. (9ZB) (1) An officer of the Board may amend a return under section 8 or 8A of this Act so as to correct obvious errors or omissions in the return (whether errors of principle, arithmetical mistakes or otherwise). (2) A correction under this section is made by notice to the person whose return it is. (3) No such correction may be made more than nine months after— (a) the day on which the return was delivered, or (b) if the correction is required in consequence of an amendment of the return under section 9ZA of this Act, the day on which that amendment was made. (4) A correction under this section is of no effect if the person whose return it is gives notice rejecting the correction. (5) Notice of rejection under subsection (4) above must be given— (a) to the officer of the Board by whom the notice of correction was given, (b) before the end of the period of 30 days beginning with the date of issue of the notice of correction.

.

Power to amend or correct partnership return

3

• (1) In section 12AB of the Taxes Management Act 1970 (c. 9) (partnership returns) omit subsections (2) to (4) and the definition in subsection (5) of “filing date”.

• (2) After that section insert—

(12ABA) (1) A partnership return may be amended by the partner who made and delivered the return, or his successor, by notice to an officer of the Board. (2) An amendment may not be made more than twelve months after the filing date. (3) Where a partnership return is amended under this section, the officer shall by notice to each of the partners amend— (a) the partner’s return under section 8 or 8A of this Act, or (b) the partner’s company tax return, so as to give effect to the amendment of the partnership return. (4) In this section “the filing date” means the day specified in the notice under section 12AA(2) of this Act or, as the case may be, subsection (3) of that section. (12ABB) (1) An officer of the Board may amend a partnership return so as to correct obvious errors or omissions in the return (whether errors of principle, arithmetical mistakes or otherwise). (2) A correction under this section is made by notice to the partner who made and delivered the return, or his successor. (3) No such correction may be made more than nine months after— (a) the day on which the return was delivered, or (b) if the correction is required in consequence of an amendment of the return under section 12ABA of this Act, the day on which that amendment was made. (4) A correction under this section is of no effect if the person to whom the notice of correction was given, or his successor, gives notice rejecting the correction. (5) Notice of rejection under subsection (4) above must be given— (a) to the officer of the Board by whom the notice of correction was given, (b) before the end of the period of 30 days beginning with the date of issue of the notice of correction. (6) Where a partnership return is corrected under this section, the officer shall by notice to each of the partners amend— (a) the partner’s return under section 8 or 8A of this Act, or (b) the partner’s company tax return, so as to give effect to the correction of the partnership return. Any such amendment shall cease to have effect if the correction is rejected.

.

Part 2 — ENQUIRIES INTO RETURNS

Enquiry into personal or trustee return

4

• (1) For section 9A of the Taxes Management Act 1970 (c. 9) (power to enquire into returns) substitute—

(9A) (1) An officer of the Board may enquire into a return under section 8 or 8A of this Act if he gives notice of his intention to do so (“notice of enquiry”)— (a) to the person whose return it is (“the taxpayer”), (b) within the time allowed. (2) The time allowed is— (a) if the return was delivered on or before the filing date, up to the end of the period of twelve months after the filing date; (b) if the return was delivered after the filing date, up to and including the quarter day next following the first anniversary of the day on which the return was delivered; (c) if the return is amended under section 9ZA of this Act, up to and including the quarter day next following the first anniversary of the day on which the amendment was made. For this purpose the quarter days are 31st January, 30th April, 31st July and 31st October. (3) A return which has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) of the return under section 9ZA of this Act. (4) An enquiry extends to anything contained in the return, or required to be contained in the return, including any claim or election included in the return, subject to the following limitation. (5) If the notice of enquiry is given as a result of an amendment of the return under section 9ZA of this Act— (a) at a time when it is no longer possible to give notice of enquiry under subsection (2)(a) or (b) above, or (b) after an enquiry into the return has been completed, the enquiry into the return is limited to matters to which the amendment relates or which are affected by the amendment. (6) In this section “the filing date” means the day mentioned in section 8(1A) or, as the case may be, section 8A(1A) of this Act. (9B) (1) This section applies if a return is amended under section 9ZA of this Act (amendment of personal or trustee return by taxpayer) at a time when an enquiry is in progress into the return. (2) The amendment does not restrict the scope of the enquiry but may be taken into account (together with any matters arising) in the enquiry. (3) So far as the amendment affects the amount stated in the self-assessment included in the return as the amount of tax payable, it does not take effect while the enquiry is in progress and— (a) if the officer states in the closure notice that he has taken the amendment into account and that— (i) the amendment has been taken into account in formulating the amendments contained in the notice, or (ii) his conclusion is that the amendment is incorrect, the amendment shall not take effect; (b) otherwise, the amendment takes effect when the closure notice is issued. (4) For the purposes of this section the period during which an enquiry is in progress is the whole of the period— (a) beginning with the day on which notice of enquiry is given, and (b) ending with the day on which the enquiry is completed. (9C) (1) This section applies where an enquiry is in progress into a return as a result of notice of enquiry by an officer of the Board under section 9A(1) of this Act. (2) If the officer forms the opinion— (a) that the amount stated in the self-assessment contained in the return as the amount of tax payable is insufficient, and (b) that unless the assessment is immediately amended there is likely to be a loss of tax to the Crown, he may by notice to the taxpayer amend the assessment to make good the deficiency. (3) In the case of an enquiry which under section 9A(5) of this Act is limited to matters arising from an amendment of the return, subsection (2) above only applies so far as the deficiency is attributable to the amendment. (4) For the purposes of this section the period during which an enquiry is in progress is the whole of the period— (a) beginning with the day on which notice of enquiry is given, and (b) ending with the day on which the enquiry is completed. (9D) (1) Where in the case of a return under section 8 or 8A of this Act— (a) alternative methods are allowed by the Tax Acts for bringing amounts into charge to tax, (b) the return is made using one of those methods but could have been made using an alternative method, and (c) an officer of the Board determines which of the alternative methods is to be used, the officer’s determination is final and conclusive, for the purposes of any enquiry into the return, as to the basis of charge to be used. (2) For the purposes of this section the cases where the Tax Acts allow alternative methods for bringing amounts into charge to tax are where they may be brought into charge either— (a) in computing profits chargeable to tax under Case I or II of Schedule D, or (b) as amounts within Case III, IV or V of that Schedule.

.

• (2) In section 9A(2)(a) of the Taxes Management Act 1970 (c. 9) (as substituted by sub-paragraph (1) above) as it applies in relation to returns for years of assessment before the year 2001-02, for “up to the end of the period of twelve months after the filing date” substitute “ twelve months beginning with that date ”.

Enquiry into partnership return

5

• (1) For section 12AC of the Taxes Management Act 1970 (c. 9) (power to enquire into partnership return) substitute—

(12AC) (1) An officer of the Board may enquire into a partnership return if he gives notice of his intention to do so (“notice of enquiry”)— (a) to the partner who made and delivered the return, or his successor, (b) within the time allowed. (2) The time allowed is— (a) if the return was delivered on or before the filing date, up to the end of the period of twelve months after the filing date; (b) if the return was delivered after the filing date, up to and including the quarter day next following the first anniversary of the day on which the return was delivered; (c) if the return is amended under section 12ABA of this Act, up to and including the quarter day next following the first anniversary of the day on which the amendment was made. For this purpose the quarter days are 31st January, 30th April, 31st July and 31st October. (3) A return which has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) of the return under section 12ABA of this Act. (4) An enquiry extends to anything contained in the return, or required to be contained in the return, including any claim or election included in the return, subject to the following limitation. (5) If the notice of enquiry is given as a result of an amendment of the return under section 12ABA of this Act— (a) at a time when it is no longer possible to give notice of enquiry under subsection (2)(a) or (b) above, or (b) after an enquiry into the return has been completed, the enquiry into the return is limited to matters to which the amendment relates or which are affected by the amendment. (6) The giving of notice of enquiry under subsection (1) above at any time shall be deemed to include the giving of notice of enquiry— (a) under section 9A(1) of this Act to each partner who at that time has made a return under section 8 or 8A of this Act or at any subsequent time makes such a return, or (b) under paragraph 24 of Schedule 18 to the Finance Act 1998 to each partner who at that time has made a company tax return or at any subsequent time makes such a return. (7) In this section “the filing date” means the day specified in the notice under section 12AA(2) of this Act or, as the case may be, subsection (3) of that section. (12AD) (1) This section applies if a partnership return is amended under section 12ABA of this Act (amendment of partnership return by taxpayer) at a time when an enquiry is in progress into the return. (2) The amendment does not restrict the scope of the enquiry but may be taken into account (together with any matters arising) in the enquiry. (3) So far as the amendment affects any amount stated in the partnership statement included in the return, it does not take effect while the enquiry is in progress and— (a) if the officer states in the closure notice that he has taken the amendment into account and that— (i) the amendment has been taken into account in formulating the amendments contained in the notice, or (ii) his conclusion is that the amendment is incorrect, the amendment shall not take effect; (b) otherwise, the amendment takes effect when the closure notice is issued. (4) Where the effect of an amendment is deferred under subsection (3) above— (a) no amendment to give effect to that amendment (“the deferred amendment”) shall be made under section 12ABA(3) of this Act (consequential amendment of partners’ returns) while the enquiry is in progress; (b) if the deferred amendment does not take effect but is taken into account as mentioned in subsection (3)(a)(i) above, section 28B(4) of this Act (amendment of partners’ returns consequential on amendment of partnership return by closure notice) applies accordingly; and (c) if the deferred amendment takes effect under subsection (3)(b) above, any necessary amendment under section 12ABA(3) of this Act may then be made. (5) For the purposes of this section the period during which an enquiry is in progress is the whole of the period— (a) beginning with the day on which notice of enquiry is given, and (b) ending with the day on which the enquiry is completed. (12AE) (1) Where in the case of a partnership return— (a) alternative methods are allowed by the Tax Acts for bringing amounts into charge to tax, (b) the return is made using one of those methods but could have been made using an alternative method, and (c) an officer of the Board determines which of the alternative methods is to be used, the officer’s determination is final and conclusive, for the purposes of any enquiry into the return, as to the basis of charge to be used. (2) For the purposes of this section the cases where the Tax Acts allow alternative methods for bringing amounts into charge to tax are those specified— (a) for income tax purposes, in section 9D(2) of this Act; (b) for corporation tax purposes, in paragraph 84(2) or (3) of Schedule 18 to the Finance Act 1998.

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• (2) In section 12AC(2)(a) of the Taxes Management Act 1970 (c. 9) (as substituted by sub-paragraph (1) above) as it applies in relation to returns for years of assessment before the year 2001-02, for “up to the end of the period of twelve months after the filing date” substitute “ twelve months beginning with that date ”.

Part 3 — REFERRAL OF QESTIONS DURING ENQUIRY

Enquiry into personal, trustee or partnership return

6

• (1) After Part 3 of the Taxes Management Act 1970 insert—

(28ZA) (1) At any time when an enquiry is in progress under section 9A(1) or 12AC(1) of this Act, any question arising in connection with the subject-matter of the enquiry may be referred to the Special Commissioners for their determination. (2) Notice of referral must be given— (a) jointly by the taxpayer and an officer of the Board, (b) in writing, (c) to the Special Commissioners. (3) The notice of referral must specify the question or questions being referred. (4) More than one notice of referral may be given under this section in relation to an enquiry. (5) For the purposes of this section the period during which an enquiry is in progress is the whole of the period— (a) beginning with the day on which notice of enquiry is given, and (b) ending with the day on which the enquiry is completed. (6) In this section “the taxpayer” means— (a) in relation to an enquiry under section 9A(1) of this Act, the person to whom the notice of enquiry was given; (b) in relation to an enquiry under section 12AC(1) of this Act, the person to whom the notice of enquiry was given or his successor. (28ZB) (1) Either party may withdraw a notice of referral under section 28ZA of this Act by notice in accordance with this section. (2) Notice of withdrawal must be given— (a) in writing, (b) to the other party to the referral and to the Special Commissioners, (c) before the first hearing by the Special Commissioners in relation to the referral. (28ZC) (1) The Lord Chancellor may make provision by regulations with respect to referrals to the Special Commissioners under— (a) section 28ZA of this Act, or (b) paragraph 31A of Schedule 18 to the Finance Act 1998. (2) Regulations under subsection (1) above may, in particular— (a) make provision with respect to any of the matters dealt with in the following provisions of this Act— (i) section 50 (procedure before the Special Commissioners), (ii) section 56 (statement of case for opinion of the High Court), (iii) section 56A (appeals from the Special Commissioners), and (iv) section 58 (proceedings in Northern Ireland), or (b) provide for any of those provisions to apply, with such modifications as may be specified in the regulations, in relation to a referral to the Special Commissioners under the provisions mentioned in subsection (1) above. (3) Regulations under subsection (1) above may— (a) make different provision for different cases or different circumstances, and (b) contain such supplementary, incidental, consequential and transitional provision as the Lord Chancellor thinks appropriate. (4) Regulations under subsection (1) above shall— (a) be made by statutory instrument, and (b) be subject to annulment in pursuance of a resolution of either House of Parliament. (5) In the following provisions any reference to an appeal includes a reference to a referral under section 28ZA of this Act or paragraph 31A of Schedule 18 to the Finance Act 1998— (a) sections 56B, 56C and 56D of this Act (power of the Lord Chancellor to make regulations about the practice and procedure to be followed in connection with appeals to the Special Commissioners); and (b) section 57 of this Act (power of the Board to make regulations about appeals relating to chargeable gains). (6) Any regulations under section 56B or 57 of this Act which are in force immediately before the commencement of subsection (1) above shall apply in relation to referrals under section 28ZA of this Act or paragraph 31A of Schedule 18 to the Finance Act 1998, subject to any necessary modifications, as they apply in relation to appeals to the Special Commissioners. (7) Regulations under this section relating to proceedings in Scotland shall not be made except with the consent of the Scottish Ministers. (28ZD) (1) While proceedings on a referral under section 28ZA of this Act are in progress in relation to an enquiry— (a) no closure notice shall be given in relation to the enquiry, and (b) no application may be made for a direction to give such a notice. (2) For the purposes of this section proceedings on a referral are in progress where— (a) notice of referral has been given, (b) the notice has not been withdrawn, and (c) the questions referred have not been finally determined. (3) For the purposes of subsection (2)(c) above a question referred is finally determined when— (a) it has been determined by the Special Commissioners, and (b) there is no further possibility of that determination being varied or set aside (disregarding any power to give permission to appeal out of time). (28ZE) (1) The determination of a question referred to the Special Commissioners under section 28ZA of this Act is binding on the parties to the referral in the same way, and to the same extent, as a decision on a preliminary issue in an appeal. (2) The determination shall be taken into account by an officer of the Board— (a) in reaching his conclusions on the enquiry, and (b) in formulating any amendments of the return required to give effect to those conclusions. (3) Any right of appeal under section 31(1)(a), (b) or (c) of this Act may not be exercised so as to reopen the question determined except to the extent (if any) that it could be reopened if it had been determined as a preliminary issue in that appeal.

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• (2) This paragraph applies—

• (a) where the notice of enquiry is given after the passing of this Act, or

• (b) where the enquiry is in progress immediately before the passing of this Act.

For the purposes of paragraph (b) an enquiry is in progress until the officer’s enquiries fall to be treated as completed under section 28A(5) or, as the case may be, section 28B(5) of the Taxes Management Act 1970 (c. 9) (as those provisions had effect apart from this Schedule).

Enquiry into company tax return

7

• (1) In Part 4 of Schedule 18 to the Finance Act 1998 (c. 36) (enquiry into company tax return), after paragraph 31 insert—

(31A) (1) At any time when an enquiry is in progress into a company’s tax return any question arising in connection with the subject-matter of the enquiry may be referred to the Special Commissioners for their determination. (2) Notice of referral must be given— (a) jointly by the company and the Inland Revenue, (b) in writing, (c) to the Special Commissioners. (3) The notice of referral must specify the question or questions being referred. (4) More than one notice of referral may be given under this paragraph in relation to an enquiry. (5) For the purposes of this paragraph the period during which an enquiry is in progress is the whole of the period— (a) beginning with the day on which the Inland Revenue give notice of enquiry into the return, and (b) ending with the day on which the enquiry is completed. (31B) (1) The Inland Revenue or the company may withdraw a notice of referral under paragraph 31A by notice in accordance with this paragraph. (2) Notice of withdrawal must be given— (a) in writing, (b) to the other party to the referral and to the Special Commissioners, (c) before the first hearing by the Special Commissioners in relation to the referral. (31C) (1) While proceedings on a referral under paragraph 31A are in progress in relation to an enquiry— (a) no closure notice shall be given in relation to the enquiry, and (b) no application may be made for a direction to give such a notice. (2) For the purposes of this paragraph proceedings on a referral are in progress where— (a) notice of referral has been given, (b) the notice has not been withdrawn, and (c) the questions referred have not been finally determined. (3) For the purposes of sub-paragraph (2)(c) a question referred is finally determined when— (a) it has been determined by the Special Commissioners, and (b) there is no further possibility of that determination being varied or set aside (disregarding any power to grant permission to appeal out of time). (31D) (1) The determination of a question referred to the Special Commissioners under paragraph 31A is binding on the parties to the referral in the same way, and to the same extent, as a decision on a preliminary issue in an appeal. (2) The determination shall be taken into account by the Inland Revenue in reaching their conclusions on the enquiry. (3) Any right of appeal under paragraph 30 or 34(3) may not be exercised so as to reopen the question determined except to the extent (if any) that it could be reopened if it had been determined as a preliminary issue in that appeal.

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• (2) This paragraph applies in relation to an enquiry under Part 4 of Schedule 18 to the Finance Act 1998 (c. 36)—

• (a) in relation to which notice of enquiry is given after the passing of this Act, or

• (b) which is in progress (within the meaning of paragraph 31(5) of that Schedule) immediately before the passing of this Act.

Part 4 — PROCEDURE ON COMPLETION OF ENQUIRY

Procedure on completion of enquiry into personal or trustee return

8

• (1) For section 28A of the Taxes Management Act 1970 (c. 9) (amendment of self-assessment where enquiries made) substitute—

(28A) (1) An enquiry under section 9A(1) of this Act is completed when an officer of the Board by notice (a “closure notice”) informs the taxpayer that he has completed his enquiries and states his conclusions. In this section “the taxpayer” means the person to whom notice of enquiry was given. (2) A closure notice must either— (a) state that in the officer’s opinion no amendment of the return is required, or (b) make the amendments of the return required to give effect to his conclusions. (3) A closure notice takes effect when it is issued. (4) The taxpayer may apply to the Commissioners for a direction requiring an officer of the Board to issue a closure notice within a specified period. (5) Any such application shall be heard and determined in the same way as an appeal. (6) The Commissioners hearing the application shall give the direction applied for unless they are satisfied that there are reasonable grounds for not issuing a closure notice within a specified period.

• (2) This paragraph applies—

• (a) where the notice of enquiry is given after the passing of this Act, or

• (b) where the enquiry is in progress immediately before the passing of this Act.

For the purposes of paragraph (b) an enquiry is in progress until the officer’s enquiries fall to be treated as completed under section 28A(5) of the Taxes Management Act 1970 (c. 9) (as that provision had effect apart from this Schedule).

Procedure on completion of enquiry into partnership return

9

• (1) For section 28B of the Taxes Management Act 1970 (amendment of partnership statement where enquiries made) substitute—

(28B) (1) An enquiry under section 12AC(1) of this Act is completed when an officer of the Board by notice (a “closure notice”) informs the taxpayer that he has completed his enquiries and states his conclusions. In this section “the taxpayer” means the person to whom notice of enquiry was given or his successor. (2) A closure notice must either— (a) state that in the officer’s opinion no amendment of the return is required, or (b) make the amendments of the return required to give effect to his conclusions. (3) A closure notice takes effect when it is issued. (4) Where a partnership return is amended under subsection (2) above, the officer shall by notice to each of the partners amend— (a) the partner’s return under section 8 or 8A of this Act, or (b) the partner’s company tax return, so as to give effect to the amendments of the partnership return. (5) The taxpayer may apply to the Commissioners for a direction requiring an officer of the Board to issue a closure notice within a specified period. (6) Any such application shall be heard and determined in the same way as an appeal. (7) The Commissioners hearing the application shall give the direction applied for unless they are satisfied that there are reasonable grounds for not issuing a closure notice within a specified period.

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• (2) This paragraph applies—

• (a) where the notice of enquiry is given after the passing of this Act, or

• (b) where the enquiry is in progress immediately before the passing of this Act.

For the purposes of paragraph (b) an enquiry is in progress until the officer’s enquiries fall to be treated as completed under section 28B(5) of the Taxes Management Act 1970 (c. 9) (as that provision had effect apart from this Schedule).

Procedure on completion of enquiry into claims, &c. not included in returns

10

• (1) Schedule 1A to the Taxes Management Act 1970 (claims, &c. not included in returns) is amended as follows.

• (2) For paragraph 7 (amendments of claims where enquiries made) substitute—

(7) (1) An enquiry under paragraph 5 above is completed when an officer of the Board by notice (a “closure notice”) informs the claimant that he has completed his enquiries and states his conclusions. (2) In the case of a claim for discharge or repayment of tax, the closure notice must either— (a) state that in the officer’s opinion no amendment of the claim is required, or (b) if in the officer’s opinion the claim is insufficient or excessive, amend the claim so as to make good or eliminate the deficiency or excess. In the case of an enquiry falling within paragraph 5(1)(b) above, paragraph (b) above only applies so far as the deficiency or excess is attributable to the claimant’s amendment. (3) In the case of a claim that is not a claim for discharge or repayment of tax, the closure notice must either— (a) allow the claim, or (b) disallow the claim, wholly or to such extent as appears to the officer appropriate. (4) A closure notice takes effect when it is issued. (5) The claimant may apply to the Commissioners for a direction requiring an officer of the Board to issue a closure notice within a specified period. (6) Any such application shall be heard and determined in the same way as an appeal. (7) The Commissioners hearing the application shall give the direction applied for unless they are satisfied that there are reasonable grounds for not issuing a closure notice within a specified period. (8) In relation to a partnership claim, references in this paragraph to the claimant are to the person who made the claim or his successor.

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• (3) This paragraph applies—

• (a) where the notice of enquiry is given after the passing of this Act, or

• (b) where the enquiry is in progress immediately before the passing of this Act.

For the purposes of paragraph (b) an enquiry is in progress until the officer’s enquiries fall to be treated as completed under paragraph 7(4) of Schedule 1A to the Taxes Management Act 1970 (c. 9) (as that provision had effect apart from this Schedule).

Part 5 — MINOR AND CONSEQUENTIAL AMENDMENTS

Appeals

11

• (1) For section 31 of the Taxes Management Act 1970 (right of appeal) substitute—

(31) (1) An appeal may be brought against— (a) any amendment of a self-assessment under section 9C of this Act (amendment by Revenue during enquiry to prevent loss of tax), (b) any conclusion stated or amendment made by a closure notice under section 28A or 28B of this Act (amendment by Revenue on completion of enquiry into return), (c) any amendment of a partnership return under section 30B(1) of this Act (amendment by Revenue where loss of tax discovered), or (d) any assessment to tax which is not a self-assessment. (2) An appeal under subsection (1)(a) above against an amendment of a self-assessment made while an enquiry is in progress shall not be heard and determined until the enquiry is completed. (3) A determination under section 9D or 12AE of this Act (choice between different Cases of Schedule D) may not be questioned on an appeal under this section. (4) This section has effect subject to any express provision in the Taxes Acts, including in particular any provision making one kind of assessment conclusive in an appeal against another kind of assessment. (31A) (1) Notice of an appeal under section 31 of this Act must be given— (a) in writing, (b) within 30 days after the specified date, (c) to the relevant officer of the Board. (2) In relation to an appeal under section 31(1)(a) or (c) of this Act— (a) the specified date is the date on which the notice of amendment was issued, and (b) the relevant officer of the Board is the officer by whom the notice of amendment was given. (3) In relation to an appeal under section 31(1)(b) of this Act— (a) the specified date is the date on which the closure notice was issued, and (b) the relevant officer of the Board is the officer by whom the closure notice was given. (4) In relation to an appeal under section 31(1)(d) of this Act— (a) the specified date is the date on which the notice of assessment was issued, and (b) the relevant officer of the Board is the officer by whom the notice of assessment was given. (5) The notice of appeal must specify the grounds of appeal. (6) On the hearing of the appeal the Commissioners may allow the appellant to put forward grounds not specified in the notice, and take them into consideration, if satisfied that the omission was not wilful or unreasonable. (31B) (1) An appeal under section 31(1) of this Act shall be to the General Commissioners, subject to— (a) section 31C of this Act (appeals to be brought to Special Commissioners), (b) any provision made by or under Part 5 of this Act, and (c) any other provision of the Taxes Acts providing for an appeal to be brought to the Special Commissioners to the exclusion of the General Commissioners. (2) Subsection (1) above has effect subject to any election under section 31D of this Act (election to take appeal to Special Commissioners). (31C) (1) Unless the Special Commissioners otherwise direct, an appeal under section 31(1)(a), (b) or (c) of this Act shall be to the Special Commissioners if— (a) the appeal relates to a return in relation to which notice of enquiry has been given under section 9A(1) or 12AC(1) of this Act, and (b) notice has been given under section 28ZA of this Act referring a question relating to the subject-matter of that enquiry to the Special Commissioners. This applies even if the notice of referral was subsequently withdrawn. (2) An appeal under section 31(1)(d) of this Act (appeal against assessment other than self-assessment) shall be to the Special Commissioners if the assessment was made— (a) by the Board, or (b) under section 350 of the principal Act. (31D) (1) The appellant may elect (in accordance with section 46(1) of this Act) to bring before the Special Commissioners an appeal under section 31(1) of this Act that would otherwise be to the General Commissioners. (2) Any such election above shall be disregarded if— (a) the appellant and the inspector or other officer of the Board agree in writing, at any time before the determination of the appeal, that it is to be disregarded, or (b) the General Commissioners have given a direction under subsection (5) below and have not revoked it. (3) Where an election has been made under subsection (1) above, the inspector or other officer of the Board may refer the election to the General Commissioners. (4) A reference under subsection (3) above must be made— (a) after giving notice to the appellant, and (b) before the determination of the appeal in respect of which the election has been made. (5) On a reference under subsection (3) above the Commissioners shall, unless they are satisfied that the appellant has arguments to present or evidence to adduce on the merits of the appeal, direct that the election be disregarded. (6) If at any time after giving a direction under subsection (5) above (but before the determination of the appeal) the General Commissioners are satisfied that the appellant has arguments to present or evidence to adduce on the merits of the appeal, they shall revoke the direction. (7) A decision to give or revoke a direction under subsection (5) above shall be final.

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• (2) This paragraph applies in relation to—

• (a) amendments of a self-assessment under section 9C of the Taxes Management Act 1970 (c. 9) as inserted by paragraph 4 of this Schedule,

• (b) closure notices issued under section 28A(1) or 28B(1) of that Act as substituted by paragraphs 8 and 9 of this Schedule,