Office of Public Sector Information
PART IV continued CHAPTER I continued
(1B) The matters referred to in subsection (1A) above are—
(a) an approved scheme;
(b) a relevant statutory scheme;
(c) an annuity contract by means of which benefits provided under an approved scheme or a relevant statutory scheme have been secured;
(d) a retirement benefits scheme which is not an approved scheme but in relation to which an application for approval for the purposes of this Chapter has been made.
(1C) A person who fails to comply with regulations made under subsection (1A)(e) above shall be liable to a penalty not exceeding £3,000.
(1D) Regulations under subsection (1A) above may make different provision for different descriptions of case.
(1E) In subsection (1A) above “prescribed” means prescribed by regulations made under that subsection.”
(3) Subsections (1) and (2) of section 605 shall cease to have effect.
(4) In section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties for failure to provide information etc.)—
(a) in the first column of the Table after the entry “regulations under section 602;” there shall be inserted the entry “regulations under section 605(1A)(b) to (d);”;
(b) in the first column of the Table for the entry “section 605(1), (2), (3)(b) and (4);” there shall be substituted the entry “section 605(3)(b) and (4);”;
(c) in the second column of the Table after the entry “regulations under section 602;” there shall be inserted the entry “regulations under section 605(1A)(a);”.
(5) Subsections (3) and (4)(b) above shall come into force on such day as the Treasury may by order appoint.
(1) The following section shall be inserted after section 605 of the Taxes Act 1988—
(1) A person who fraudulently or negligently makes a false statement or false representation on making an application for the approval for the purposes of this Chapter of—
(a) a retirement benefits scheme, or
(b) an alteration in such a scheme,
shall be liable to a penalty not exceeding £3,000.
(2) In a case where—
(a) a person fraudulently or negligently makes a false statement or false representation, and
(b) in consequence that person, or any other person, obtains relief from or repayment of tax under this Chapter,
the person mentioned in paragraph (a) above shall be liable to a penalty not exceeding £3,000.”
(2) This section shall apply in relation to things done or omitted after the day on which this Act is passed.
(1) Section 591 of the Taxes Act 1988 (discretionary approval of retirement benefits schemes) shall be amended as follows.
(2) In subsection (2)(g) (annuity contracts)—
(a) after “relevant benefits” there shall be inserted “falling within subsection (2A) below”;
(b) the words “approved by the Board and” shall be omitted.
(3) The following subsection shall be inserted after subsection (2)—
“(2A) Relevant benefits fall within this subsection if they correspond with benefits that could be provided by an approved scheme, and for this purpose—
(a) a hypothetical scheme (rather than any particular scheme) is to be taken, and
(b) benefits provided by a scheme directly (rather than by means of an annuity contract) are to be taken.”
(4) This section shall apply in relation to a scheme not approved by virtue of section 591 of the Taxes Act 1988 before 1st July 1994.
(1) Section 596A of the Taxes Act 1988 (taxation of benefits under non-approved schemes) shall be amended as follows.
(2) In subsection (4), at the beginning there shall be inserted “Subject to subsection (9) below”.
(3) For subsection (6) there shall be substituted—
“(6) Tax shall not be charged under this section in the case of—
(a) any pension or annuity which is chargeable to tax under Schedule E by virtue of section 19(1); or
(b) any pension or other benefit chargeable to tax under section 58.”
(4) In subsection (7)—
(a) for the words “by virtue of section 19(1)1”, in the first place where they occur, there shall be substituted “as mentioned in subsection (6)(a) above”;
(b) in paragraph (a), for the words “subsection (6) above” there shall be substituted “subsection (6)(a) above”; and
(c) in paragraph (b) for the words “section 19(1)1” there shall be substituted “section 19(1)”.
(5) For subsections (8) and (9) there shall be substituted—
“(8) Subject to subsection (9) below, tax shall not be charged under this section (or section 19(1) or 148) in the case of a lump sum where—
(a) the employer has paid any sum or sums with a view to the provision of any relevant benefits under a retirement benefits scheme;
(b) an employee has been assessed to tax in respect of the sum or sums by virtue of section 595(1); and
(c) the lump sum is provided under the scheme to the employee, any person falling within section 595(5) in relation to the employee or any other individual designated by the employee.
(9) Where any of the income or gains accruing to the scheme under which the lump sum is provided is not brought into charge to tax, tax shall be charged under this section on the amount of the lump sum received less any deduction applicable under subsection (10) or (11) below.
(10) Subject to subsection (11) below, the deduction applicable is the aggregate of—
(a) any sum or sums in respect of which the employee has been assessed as mentioned in subsection (8)(b) above, and
(b) any sum or sums paid by the employee,
which in either case were paid by way of contribution to the provision of the lump sum.
(11) Where—
(a) the lump sum is provided under the scheme on the disposal of a part of any asset or the surrender of any part of or share in any rights in any asset, and
(b) the employee, any person falling within section 595(5) in relation to the employee or any person connected with the employee has any right to receive or any expectation of receiving a further lump sum (or further lump sums) under the scheme on a further disposal of any part of the asset or a further surrender of any part of or share in any rights in the asset,
the deduction applicable shall be determined in accordance with the formula in subsection (12) below.
(12) The formula is—
(13) For the purposes of the formula in subsection (12) above—
D is the deduction applicable;
S is the aggregate amount of any sum or sums of a description mentioned in paragraphs (a) and (b) of subsection (10) above;
A is the amount of the lump sum received in relation to which the deduction applicable falls to be determined;
B is the market value of the asset in relation to which the disposal or surrender occurred, on the assumption that the valuation is made immediately before the disposal or surrender.
(14) An individual may not claim that a deduction is applicable in relation to a lump sum more than once.
(15) For the purposes of subsections (8) and (9) above, it shall be assumed unless the contrary is shown—
(a) that no sums have been paid, and the employee has not been assessed in respect of any sums paid, with a view to the provision of relevant benefits;
(b) that the income or gains accruing to a scheme under which the benefit is provided are not brought into charge to tax; and
(c) that no deduction is applicable under subsection (10) or (11) above.
(16) Section 839 shall apply for the purposes of subsection (11) above.
(17) In subsection (13) above “market value” shall be construed in accordance with section 272 of the 1992 Act.”
(6) The amendments of section 596A made by this section shall have effect in relation to retirement benefit schemes—
(a) entered into on or after 1st December 1993, or
(b) entered into before that day if the scheme is varied on or after that day with a view to the provision of the benefit.
(7) Subject to subsection (8) below, in the Taxes Act 1988—
(a) in section 188(1), paragraph (c), and
(b) in section 189, paragraph (b),
(exemption from tax where recipient of benefit or lump sum chargeable to tax in respect of sums paid or treated as paid with a view to the provision of the benefit or lump sum) shall cease to have effect in relation to any benefit provided or lump sum paid on or after 1st December 1993.
(8) The repeals made by subsection (7) above shall not have effect in relation to any benefit provided or lump sum paid on or after 1st December 1993 in pursuance of a scheme or arrangement entered into before that day unless the scheme or arrangement is varied on or after that day with a view to the provision of the benefit or lump sum.
(1) In Chapter IV of Part XIV of the Taxes Act 1988 (personal pension schemes) the following shall be inserted after section 648—
(1) Subject to subsection (2) below, where funds held for the purposes of an approved personal pension scheme are used to acquire an annuity—
(a) the annuity shall be charged to tax under Schedule E and section 203 shall apply accordingly;
(b) the annuity shall not be charged to tax under Case III of Schedule D.
(2) As respects any approved personal pension scheme the Board may direct that, until such date as the Board may specify, annuities acquired with funds held for the purposes of the scheme shall be charged to tax as annual payments under Case III of Schedule D, and tax shall be deductible under sections 348 and 349 accordingly.”
(2) This section shall apply in relation to payments which are made under annuities on or after 6th April 1995.
(1) In section 597 of the Taxes Act 1988 (pensions paid under retirement benefits schemes generally charged under Schedule E) the following subsection shall be inserted after subsection (2)—
“(3) Without prejudice to subsection (1) above, where funds held for the purposes of any scheme which is approved or is being considered for approval under this Chapter are used to acquire an annuity—
(a) the annuity shall be charged to tax under Schedule E and section 203 shall apply accordingly;
(b) the annuity shall not be charged to tax under Case III of Schedule D.”
(2) This section shall apply in relation to payments which are made under annuities on or after the day on which this Act is passed.
(1) In section 468E of the Taxes Act 1988 (authorised unit trusts: corporation tax), for subsection (2) (deemed rate of corporation tax) there shall be substituted—
“(2) The rate of corporation tax—
(a) for the financial year 1993, shall be deemed to be 22.5 per cent; and
(b) subject to subsection (3) below and section 468EE, for any other financial year shall be deemed to be the rate at which income tax at the basic rate is charged for the year of assessment which begins on 6th April in the financial year concerned.”
(2) After that section there shall be inserted—
(1) Where this subsection applies, the rate of corporation tax for the financial year shall be deemed to be the rate at which income tax at the lower rate is charged for the year of assessment which begins on 6th April in that financial year.
(2) Subsection (1) above only applies—
(a) for the financial year 1994 and subsequent financial years; and
(b) where, on a claim made within the period of twelve months from the end of the accounting period which or part of which falls in the financial year concerned, it is shown to the satisfaction of the inspector that throughout that accounting period the condition in subsection (3) below is fulfilled by the investments subject to the trusts of the authorised unit trust.
(3) The condition in this subsection is fulfilled by the investments if the market value of such of those investments as are qualifying investments does not exceed 60 per cent. of the market value of all those investments.
(4) For the purposes of subsection (3) above “qualifying investments” means any of the following investments—
(a) any money placed at interest;
(b) any security—
(i) including any loan stock or similar security whether of the Government of the United Kingdom or of any other government or of any public or local authority in the United Kingdom or elsewhere, or of any company, and whether secured or unsecured, but
(ii) excluding shares in a company;
(c) any shares in a building society; and
(d) an entitlement to a share in the investments subject to the trusts of another authorised unit trust, unless, throughout the relevant period, the condition in subsection (5) below is fulfilled by the investments subject to the trusts of that other authorised unit trust.
(5) The condition in this subsection is fulfilled by the investments if the market value of such of the investments as fall within paragraphs (a) to (c) of subsection (4) above does not exceed 60 per cent. of the market value of all those investments.
(6) In subsection (4)(d) above “the relevant period” means the accounting period in relation to which by virtue of subsection (2)(b) above the question whether the entitlement is a “qualifying investment” falls to be determined.
(7) For the purposes of this section “investment” does not include cash awaiting investment.
(8) The Treasury may by order amend this section so as to extend or restrict the meaning of qualifying investments for the purposes of subsection (3) above.
(9) An order under subsection (8) above may contain such transitional provision as the Treasury think necessary or expedient.”
Schedule 14 to this Act (distributions of authorised unit trusts) shall have effect.
(1) In section 468 of the Taxes Act 1988 (authorised unit trusts), in subsection (6) (definitions) at the beginning there shall be inserted “Subject to subsections (7) to (9) below”.
(2) After that subsection there shall be added—
“(7) Each of the parts of an umbrella scheme shall be regarded for the purposes of this Chapter as an authorised unit trust and the scheme as a whole shall not be so regarded.
(8) In this section, “umbrella scheme” means a unit trust scheme—
(a) which provides arrangements for separate pooling of the contributions of the participants and the profits or income out of which payments are to be made to them;
(b) under which the participants are entitled to exchange rights in one pool for rights in another; and
(c) in the case of which an order under section 78 of the [1986 c. 60.] Financial Services Act 1986 is in force;
and any reference to a part of an umbrella scheme is a reference to such of the arrangements as relate to a separate pool.
(9) In relation to a part of an umbrella scheme, any reference—
(a) to investments subject to the trusts of an authorised unit trust, shall have effect as a reference to such of the investments as under the arrangements form part of the separate pool to which the part of the umbrella scheme relates; and
(b) to a unit holder, shall have effect as a reference to a person for the time being having rights in that separate pool.”
(3) In section 469 of the Taxes Act 1988 (other unit trusts)—
(a) in subsection (1)(a) (application of section) for the words “that is not an authorised unit trust” there shall be substituted “that is neither an authorised unit trust nor an umbrella scheme”; and
(b) after subsection (6) there shall be inserted—
“(6A) In this section “umbrella scheme” has the same meaning as in section 468.”
(4) Subject to what follows, the amendments made by subsections (1) to (3) above shall have effect on and after 1st April 1994 in relation to unit trust schemes and their participants.
(5) Nothing in those amendments shall have effect before the relevant date in relation to a unit trust scheme which immediately before 1st April 1994 falls within the definition of an umbrella scheme contained in those amendments.
(6) In this section “the relevant date”, means, in relation to a unit trust scheme, the day after the end of the last distribution period of the scheme which commences before 1st April 1994.
(7) On and after the relevant date, the amendments made by subsections (1) to (3) above shall have effect in relation to a scheme—
(a) to which subsection (5) above applies, and
(b) which immediately before the relevant date falls within the definition of an umbrella scheme contained in those amendments,
subject to subsections (8) to (10) below.
(8) The amendments made by subsections (1) to (3) above shall not prevent the trustees of the scheme on and after the relevant date—
(a) making a claim under section 239(3) of the Taxes Act 1988 (carry back of surplus advance corporation tax) in respect of accounting periods of the scheme ending before the relevant date; or
(b) continuing anything which immediately before that date was in the process of being done for the purposes of tax in relation to such accounting periods.
(9) Where immediately before the relevant date the trustees of the scheme are entitled to carry forward an excess under—
(a) section 75(3) of the Taxes Act 1988 (carry forward of management expenses and sums treated as management expenses), or
(b) section 241 of that Act (carry forward of franked investment income),
then, on the relevant date, that right shall be translated into a right in each successor company to carry forward a proportionate part of that excess.
(10) Where immediately before the relevant date the trustees of the scheme have an amount of surplus advance corporation tax which—
(a) has not been dealt with under subsection (3) of section 239 of the Taxes Act 1988, and
(b) is due to be treated under subsection (4) of that section as if it were advance corporation tax paid by them in their next accounting period,
then, on and after the relevant date, a proportionate part of that amount shall be treated as paid under subsection (4) of that section by each successor company in its first accounting period.
(11) In subsections (9) and (10) above “successor company” means, in relation to a scheme, each part of the scheme which on the relevant date becomes an authorised unit trust.
(1) In section 154 of the [1993 c. 34.] Finance Act 1993 (definitions connected with assets) the following subsections shall be inserted after subsection (5)—
“(5A) The question whether a company becomes unconditionally entitled at a particular time to an asset falling within section 153(1)(a) above shall be determined without reference to the fact that there is or is not a later time when, or before which, the whole or any part of the debt is required to be paid.
(5B) Where an asset falling within section 153(1)(a) above consists of a right to interest—
(a) a company becomes unconditionally entitled to the asset at the time when or (as the case may be) before which the interest is required to be paid to the company, and
(b) subsection (5A) above shall not apply.”
(2) In that section the following subsections shall be inserted after subsection (13)—
“(13A) In a case where—
(a) a company would (apart from this subsection) become entitled to an asset at a particular time (the earlier time) by virtue of subsections (1) to (11) above,
(b) the asset falls within section 153(1)(a) above and the debt concerned is a debt on a security, or the asset is a share,
(c) the time at which the company, in drawing up its accounts, regards itself as becoming entitled to the asset is a time (the later time) later than the earlier time, and
(d) the accounts are drawn up in accordance with normal accountancy practice,
the company shall be taken to become entitled to the asset at the later time and not at the earlier time.
(13B) In a case where—
(a) a company would (apart from this subsection) cease to be entitled to an asset at a particular time (the earlier time) by virtue of subsections (1) to (11) above,
(b) the asset falls within section 153(1)(a) above and the debt concerned is a debt on a security, or the asset is a share,
(c) the time at which the company, in drawing up its accounts, regards itself as ceasing to be entitled to the asset is a time (the later time) later than the earlier time, and
(d) the accounts are drawn up in accordance with normal accountancy practice,
the company shall be taken to cease to be entitled to the asset at the later time and not at the earlier time.”
(3) In section 155 of that Act (definitions connected with liabilities) the following subsections shall be inserted after subsection (4)—
“(4A) The question whether a company becomes unconditionally subject at a particular time to a liability falling within section 153(2)(a) above shall be determined without reference to the fact that there is or is not a later time when, or before which, the whole or any part of the debt is required to be paid.
(4B) Where a liability falling within section 153(2)(a) above consists of a duty to pay interest—
(a) a company becomes unconditionally subject to the liability at the time when or (as the case may be) before which the company is required to pay the interest, and
(b) subsection (4A) above shall not apply.”
(1) In section 126 of the [1993 c. 34.] Finance Act 1993 (accrual on currency contracts) the following subsection shall be inserted after subsection (1)—
“(1A) In deciding whether a contract falls within subsection (1) above it is immaterial that the rights and duties there mentioned may be exercised and discharged by a payment made to or, as the case may require, by the qualifying company of an amount (in whatever currency) designed to represent any difference in value at the specified time between the two payments referred to in that subsection.”
(2) In section 146 of that Act (early termination of currency contract) the following subsection shall be inserted after subsection (1)—
“(1A) This section also applies where—
(a) a qualifying company ceases to be entitled to rights and subject to duties under a currency contract, and
(b) it so ceases by virtue of the making of a payment to or by the company of an amount (in whatever currency) designed to represent any difference in value at the specified time between the two payments referred to in section 126(1) above.”
(3) In section 164(2) of that Act (definition of currency contract for purposes of the Chapter) after “(1)” there shall be inserted “and (1A)”.
(1) Schedule 15 to the [1993 c. 34.] Finance Act 1993 (alternative calculation) shall be amended as follows.
(2) The following shall be inserted after paragraph 4—
4A (1) Regulations may provide that where—
(a) as regards a contract an initial exchange gain or initial exchange loss accrues to a company for an accrual period under section 126(5) of this Act or would so accrue apart from regulations under this Schedule,
(b) the relevant duty is eligible to be matched on any day in the accrual period with an asset held by the company, and such other conditions as may be prescribed are fulfilled, and
(c) an election is made in accordance with the regulations to match the duty with the asset on any such day and the election has effect by virtue of the regulations,
the amount of the gain or loss shall be found in accordance with the alternative method of calculation.
(2) Regulations may also provide that as regards any day in respect of which an election has effect the accrued amount shall be ascertained in accordance with prescribed rules.
(3) The reference in sub-paragraph (1) above to the relevant duty is to the duty to which, under the contract, the company becomes subject as regards the second currency (within the meaning given by section 126 of this Act).
(4) Where regulations are made under this paragraph, sub-paragraphs (3) to (12) of paragraph 4 above shall apply as they apply where regulations are made under that paragraph; but in the application of those sub-paragraphs by virtue of this sub-paragraph—
(a) the references to a liability in sub-paragraphs (3), (4), (9) and (11) shall be construed as references to a duty,
(b) the references to liabilities in sub-paragraphs (3) and (4) shall be construed as references to duties, and
(c) the reference in sub-paragraph (11)(a) to sub-paragraph (1) of paragraph 4 shall be construed as a reference to sub-paragraph (1) above.”
(3) The following paragraph shall be inserted after paragraph 5—
“5A (1) This paragraph applies where regulations under both paragraph 2 and paragraph 4A above apply—
(a) as regards the same contract, and
(b) for the same accrual period.
(2) Regulations may provide that, as regards any day falling within the period and identified in accordance with prescribed rules, the accrued amount shall be ascertained in accordance with rules prescribed under this paragraph (rather than provisions made under either of those paragraphs).”
(4) In paragraph 6—
(a) for “paragraphs 2 to 5 above” there shall be substituted “the relevant paragraphs”;
(b) at the end there shall be inserted “; and the relevant paragraphs are paragraphs 2, 3, 4 and 5 above.”
(5) In paragraph 7 for “5” there shall be substituted “5A”.
(1) At the end of section 83 of the [1990 c. 1.] Capital Allowances Act 1990 (interpretation of Part II, which relates to machinery and plant) there shall be added—
“(7) Schedule AA1 (which excludes certain expenditure from the expression “expenditure on the provision of machinery or plant”) shall have effect.”and before Schedule A1 to that Act there shall be inserted—
1 (1) For the purposes of this Act expenditure on the provision of machinery or plant does not include any expenditure on the provision of a building.
(2) For the purposes of this Schedule “building” includes any asset in the building—
(a) which is incorporated into the building, or
(b) which, by reason of being moveable or otherwise, is not so incorporated, but is of a kind normally incorporated into buildings;
and in particular includes any asset in or in connection with the building included in any of the items in column 1 or column 2 of the following Table (“Table 1”).
Finance Act 1994