Office of Public Sector Information
PART IV continued CHAPTER IV continued
(1) In Schedule 10 to the Taxes Act 1988 (further provisions relating to profit sharing schemes) for paragraph 3 (the appropriate percentage) there shall be substituted—
“3 (1) For the purposes of any of the relevant provisions charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of his shares, the “appropriate percentage” in relation to those shares is 100 per cent., unless sub-paragraph (2) below applies.
(2) Where the individual—
(a) ceases to be a director or employee of the grantor or, in the case of a group scheme, a participating company as mentioned in paragraph 2(a) above, or
(b) reaches the relevant age,
before the event occurs, the “appropriate percentage” is 50 per cent., unless paragraph 6(4) below applies.”
(2) In section 187(8) of that Act (determination of certain values and percentages where shares are appropriated to a participant at different times) paragraph (b) (which relates to the appropriate percentage), and the word “and” immediately preceding it, shall cease to have effect.
(3) Subsections (1) and (2) above have effect in relation to the occurrence, on or after the day on which this Act is passed, of events by reason of whose occurrence any provision of section 186 or 187 of, or Schedule 9 or 10 to, the Taxes Act 1988 charges an individual to income tax under Schedule E.
(1) In section 186(12) of the Taxes Act 1988 (determination of the appropriate allowance for the purposes of the charge to tax on capital receipts by a participant in an approved profit sharing scheme)—
(a) for “£100” there shall be substituted “£60”; and
(b) for “five years” there shall be substituted “three years”.
(2) Subsection (1) above has effect for the year 1997-98 and subsequent years of assessment.
(1) In Schedule 5 to the [1989 c. 26.] Finance Act 1989 (employee share ownership trusts) in paragraph 4(5)(a) (for a trust to be a qualifying ESOT, its beneficiaries must have been employees or directors of the company for at least one year) the words “not less than one year and” shall cease to have effect.
(2) This section applies to trusts established on or after the day on which this Act is passed.
(1) In Schedule 5 to the [1989 c. 26.] Finance Act 1989 (employee share ownership trusts), in paragraph 4 (the trust deed must contain provision as to the beneficiaries) after sub-paragraph (2) there shall be inserted—
“(2A) The trust deed may provide that a person is a beneficiary at a given time if at that time he is eligible to participate in a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988—
(a) which was established by a company within the founding company’s group, and
(b) which is approved under that Schedule.
(2B) Where a trust deed contains a rule conforming with sub-paragraph (2A) above it must provide that the only powers and duties which the trustees may exercise in relation to persons who are beneficiaries by virtue only of that rule are those which may be exercised in accordance with the provisions of a scheme such as is mentioned in that sub-paragraph.”
(2) In consequence of the amendment made by subsection (1) above, section 69 of, and Schedule 5 to, the [1989 c. 26.] Finance Act 1989 (which respectively make provision about chargeable events in relation to the trustees of qualifying employee share ownership trusts and the requirements to be satisfied by such trusts) shall be amended in accordance with the following provisions of this section.
(3) In subsection (4) of that section (meaning of “qualifying terms” for the purposes of the provision that the transfer of securities to beneficiaries is a chargeable event if it is not on qualifying terms)—
(a) in paragraph (a) (securities which are transferred at the same time must be transferred on similar terms) after “time” there shall be inserted “other than those transferred on a transfer such as is mentioned in subsection (4ZA) below”;
(b) in paragraph (b) (securities must have been offered to all the persons who are beneficiaries), after “trust deed” there shall be inserted “by virtue of a rule which conforms with paragraph 4(2), (3) or (4) of Schedule 5 to this Act”; and
(c) in paragraph (c) (securities must be transferred to all such beneficiaries who have accepted the offer) for “beneficiaries” there shall be substituted “persons”.
(4) After subsection (4) of that section there shall be inserted—
“(4ZA) For the purposes of subsection (1)(b) above a transfer of securities is also made on qualifying terms if—
(a) it is made to a person exercising a right to acquire shares, and
(b) that right was obtained in accordance with the provisions of a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988—
(i) which was established by, or by a company controlled by, the company which established the trust, and
(ii) which is approved under that Schedule, and
(c) that right is being exercised in accordance with the provisions of that scheme, and
(d) the consideration for the transfer is payable to the trustees.”
(5) In sub-paragraph (4) of paragraph 4 of that Schedule (trust deed may provide for charity to be beneficiary if there are no beneficiaries falling within a rule conforming with sub-paragraph (2) or (3)) after “sub-paragraph (2)” there shall be inserted “, (2A)”.
(6) In sub-paragraph (7) of that paragraph (trust deed must not provide for a person to be a beneficiary unless he falls within a rule conforming with sub-paragraph (2), (3) or (4)) after “sub-paragraph (2)” there shall be inserted “, (2A)”.
(7) In sub-paragraph (8) of that paragraph (trust deed must provide that person with material interest in founding company cannot be a beneficiary) after “at a particular time (the relevant time)” there shall be inserted “by virtue of a rule which conforms with sub-paragraph (2), (3) or (4) above”.
(8) In paragraph 5(2) of that Schedule (trust deed must be so expressed that it is apparent that the general functions of the trustees are as mentioned in paragraphs (a) to (e)) after paragraph (c) there shall be inserted—
“(cc) to grant rights to acquire shares to persons who are beneficiaries under the terms of the trust deed;”.
(9) In paragraph 9 of that Schedule (trust deed must provide that transfers of securities to beneficiaries must be on qualifying terms and within the qualifying period) in sub-paragraph (2) (meaning of qualifying terms)—
(a) in paragraph (a) (securities which are transferred at the same time must be transferred on similar terms) after “time” there shall be inserted “other than those transferred on a transfer such as is mentioned in sub-paragraph (2ZA) below”;
(b) in paragraph (b) (securities must have been offered to all the persons who are beneficiaries) after “trust deed” there shall be inserted “by virtue of a rule which conforms with paragraph 4(2), (3) or (4) above”; and
(c) in paragraph (c) (securities must be transferred to all such beneficiaries who have accepted the offer) for “beneficiaries” there shall be substituted “persons”.
(10) After sub-paragraph (2) of that paragraph there shall be inserted—
“(2ZA) For the purposes of sub-paragraph (1) above a transfer of securities is also made on qualifying terms if—
(a) it is made to a person exercising a right to acquire shares, and
(b) that right was obtained in accordance with the provisions of a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988—
(i) which was established by, or by a company controlled by, the founding company, and
(ii) which is approved under that Schedule, and
(c) that right is being exercised in accordance with the provisions of that scheme, and
(d) the consideration for the transfer is payable to the trustees.”
(11) In paragraph 10 of that Schedule (trust deed must not contain features not essential or reasonably incidental to purposes mentioned in that paragraph)—
(a) after “acquiring sums and securities,” there shall be inserted “granting rights to acquire shares to persons who are eligible to participate in savings-related share option schemes approved under Schedule 9 to the Taxes Act 1988, transferring shares to such persons,”; and
(b) for “Schedule 9 to the Taxes Act 1988” there shall be substituted “that Schedule”.
(12) This section has effect in relation to trusts established on or after the day on which this Act is passed.
(1) In subsection (1) of section 8 of the [1970 c. 9.] Taxes Management Act 1970 (personal return), and in subsection (1) of section 8A of that Act (trustee’s return), after the words “year of assessment,” there shall be inserted the words “and the amount payable by him by way of income tax for that year,”.
(2) In subsection (1A) of each of those sections, the words from “and the amounts referred to” to the end shall cease to have effect.
(3) After that subsection of each of those sections there shall be inserted the following subsection—
“(1AA) For the purposes of subsection (1) above—
(a) the amounts in which a person is chargeable to income tax and capital gains tax are net amounts, that is to say, amounts which take into account any relief or allowance a claim for which is included in the return; and
(b) the amount payable by a person by way of income tax is the difference between the amount in which he is chargeable to income tax and the aggregate amount of any income tax deducted at source and any tax credits to which section 231 of the principal Act applies.”
(4) For subsection (1) of section 9 of that Act (returns to include self-assessment) there shall be substituted the following subsection—
“(1) Subject to subsection (2) below, every return under section 8 or 8A of this Act shall include a self-assessment, that is to say—
(a) an assessment of the amounts in which, on the basis of the information contained in the return and taking into account any relief or allowance a claim for which is included in the return, the person making the return is chargeable to income tax and capital gains tax for the year of assessment; and
(b) an assessment of the amount payable by him by way of income tax, that is to say, the difference between the amount in which he is assessed to income tax under paragraph (a) above and the aggregate amount of any income tax deducted at source and any tax credits to which section 231 of the principal Act applies.”
(5) In subsection (1)(b) of section 11AA of that Act (return of profits to include self-assessment), for the words “, allowance or repayment of tax” there shall be substituted the words “or allowance”.
(6) In subsection (1)(a) of section 12AA of that Act (partnership return), after the words “so chargeable” there shall be inserted the words “and the amount payable by way of income tax by each such partner”.
(7) For subsection (1A) of that section there shall be substituted the following subsection—
“(1A) For the purposes of subsection (1) above—
(a) the amount in which a partner is chargeable to income tax or corporation tax is a net amount, that is to say, an amount which takes into account any relief or allowance for which a claim is made; and
(b) the amount payable by a partner by way of income tax is the difference between the amount in which he is chargeable to income tax and the aggregate amount of any income tax deducted at source and any tax credits to which section 231 of the principal Act applies.”
(8) This section and sections 122, 123, 125 to 127 and 141 below—
(a) so far as they relate to income tax and capital gains tax, have effect as respects the year 1996-97 and subsequent years of assessment, and
(b) so far as they relate to corporation tax, have effect as respects accounting periods ending on or after the appointed day for the purposes of Chapter III of Part IV of the [1994 c. 9.] Finance Act 1994.
(1) At the end of subsection (1) of section 9 of the [1970 c. 9.] Taxes Management Act 1970 (as substituted by section 121(4) above) there shall be inserted the words “but nothing in this subsection shall enable a self-assessment to show as repayable any income tax treated as deducted or paid by virtue of section 233(1), 246D(1), 249(4), 421(1), 547(5) or 599A(5) of the principal Act.”
(2) At the end of subsection (1) of section 59B of that Act (payment of income tax and capital gains tax) there shall be inserted the words “but nothing in this subsection shall require the repayment of any income tax treated as deducted or paid by virtue of section 233(1), 246D(1), 249(4), 421(1), 547(5) or 599A(5) of the principal Act.”
(3) In subsection (1) of section 233 of the Taxes Act 1988 (taxation of certain recipients of distributions), for paragraphs (a) and (b) there shall be substituted the following paragraphs—
“(a) that person shall be treated as having paid income tax at the lower rate on the amount or value of the distribution;
(b) no repayment shall be made of any income tax treated by virtue of paragraph (a) above as having been paid;”.
(4) In paragraph (a) of subsection (1A) of that section—
(a) for sub-paragraph (i) there shall be substituted the following sub-paragraph—
“(i) income on which that person falls to be treated as having paid income tax at the lower rate by virtue of paragraph (a) of subsection (1) above, or”; and
(b) for the words “that assessment” there shall be substituted the words “that subsection”.
(5) In the following enactments, namely—
(a) subsection (2)(a) of section 246D of that Act (individuals etc.); and
(b) subsection (4)(a) of section 249 of that Act (stock dividends treated as income),
for the words from “no assessment” to “on it” there shall be substituted the words “the individual shall be treated as having paid income tax at the lower rate on that income”.
(6) In subsection (1)(b) of section 421 of that Act (taxation of borrower when loan released), for the words “no assessment shall be made on him in respect of” there shall be substituted the words “he shall not be liable to pay”.
(7) The following shall cease to have effect, namely—
(a) in subsection (5)(a) of section 547 of that Act (method of charging to tax), the words from “no assessment” to “but”;
(b) in subsection (6) of section 599A of that Act (charge to tax: payments out of surplus funds), the words from “subject” to “and”; and
(c) subsection (7) of that section.
(1) In subsection (2) of section 12AA of the [1970 c. 9.] Taxes Management Act 1970 (partnership return) after the words “with the notice” there shall be inserted the words “or a successor of his”.
(2) In subsection (3) of that section after the words “the partner” there shall be inserted the words “or a successor of his”.
(3) In subsection (7)(a) of that section, the words “any part of” shall cease to have effect.
(4) At the end of that section there shall be inserted the following subsections—
“(11) In this Act “successor”, in relation to a person who is required to make and deliver, or has made and delivered, a return in pursuance of a notice under subsection (2) or (3) above, but is no longer available, means—
(a) where a partner is for the time being nominated for the purposes of this subsection by a majority of the relevant partners, that partner; and
(b) where no partner is for the time being so nominated, such partner as—
(i) in the case of a notice under subsection (2) above, is identified in accordance with rules given with that notice; or
(ii) in the case of a notice under subsection (3) above, is nominated for the purposes of this subsection by an officer of the Board;
and “predecessor” and “successor”, in relation to a person so nominated or identified, shall be construed accordingly.
(12) For the purposes of subsection (11) above a nomination under paragraph (a) of that subsection, and a revocation of such a nomination, shall not have effect in relation to any time before notice of the nomination or revocation is given to an officer of the Board.
(13) In this section “relevant partner” means a person who was a partner at any time during the period for which the return was made or is required, or the personal representatives of such a person.”
(5) In subsection (1) of section 12AB of that Act (partnership return to include partnership statement)—
(a) in paragraph (a), for the words “each period of account ending within the period in respect of which the return is made” there shall be substituted the words “the period in respect of which the return is made and each period of account ending within that period”;
(b) in sub-paragraph (i) of that paragraph, for the words “that period” there shall be substituted the words “the period in question”;
(c) after that sub-paragraph there shall be inserted the following sub-paragraph—
“(ia) the amount of the consideration which, on that basis, has accrued to the partnership in respect of each disposal of partnership property during that period,”;
and
(d) in paragraph (b), after the words “such period” there shall be inserted the words “as is mentioned in paragraph (a) above” and after the word “loss,” there shall be inserted the word “consideration,”.
(6) In subsection (2) of that section—
(a) in paragraph (a) after the words “to that person” there shall be inserted the words “or a successor”; and
(b) in paragraph (b) for the words from “partnership statement” to “he” there shall be substituted the words “or a predecessor’s partnership statement as to give effect to any amendments to the return in which it is included which he or a predecessor”.
(7) In section 12AC of that Act (power to enquire into partnership return)—
(a) in subsection (1)(b), after the word “person” there shall be inserted the words “or a successor of that person”; and
(b) subsection (6) (which is superseded by subsection (4) above) shall cease to have effect.
(8) In subsection (1)(b) of section 93A of that Act (failure to make partnership return), after the word “he” there shall be inserted the words “or a successor of his”.
(9) In subsections (3) and (4) of that section, after the words “the representative partner” there shall be inserted the words “or a successor of his”.
(10) In subsection (6) of that section—
(a) after the words “the representative partner” there shall be inserted the words “or a successor of his”; and
(b) after the words “that partner”, in both places where they occur, there shall be inserted the words “or successor”.
(11) In subsection (7) of that section, for the words “the representative partner had a reasonable excuse for not delivering the return” there shall be substituted the words “the person for the time being required to deliver the return (whether the representative partner or a successor of his) had a reasonable excuse for not delivering it”.
(12) In subsection (1)(a)(ii) of section 95A of that Act (incorrect partnership return or accounts), for the words “such a return” there shall be substituted the words “a return of such a kind”.
(13) In subsection (3) of that section—
(a) after the words “the representative partner” there shall be inserted the words “or a successor of his”; and
(b) after the words “that partner”, in both places where they occur, there shall be inserted the words “or successor”.
(14) In subsection (1) of section 118 of that Act (interpretation), for the definition of “successor” there shall be substituted the following definition—
““successor”, in relation to a person who is required to make and deliver, or has made and delivered, a return under section 12AA of this Act, and “predecessor” and “successor”, in relation to the successor of such a person, shall be construed in accordance with section 12AA(11) of this Act;”.
(1) The [1970 c. 9.] Taxes Management Act 1970, as it has effect—
(a) for the purposes of income tax and capital gains tax, as respects the year 1996-97 and subsequent years of assessment, and
(b) for the purposes of corporation tax, as respects accounting periods ending on or after the day appointed under section 199 of the [1994 c. 9.] Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (self-assessment management provisions),
shall be amended in accordance with the following provisions of this section.
(2) In section 12B (records to be kept for purposes of returns) in subsection (4) (which permits the duty to preserve records to be discharged by the preservation of the information contained in them, and provides for the admissibility in evidence of copy documents) at the beginning there shall be inserted the words “Except in the case of records falling within subsection (4A) below,”.
(3) After that subsection there shall be inserted—
“(4A) The records which fall within this subsection are—
(a) any statement in writing such as is mentioned in—
(i) subsection (1) of section 234 of the principal Act (amount of qualifying distribution and tax credit), or
(ii) subsection (1) of section 352 of that Act (gross amount, tax deducted, and actual amount paid, in certain cases where payments are made under deduction of tax),
which is furnished by the company or person there mentioned, whether after the making of a request or otherwise;
(b) any certificate or other record (however described) which is required by regulations under section 566(1) of the principal Act to be given to a sub-contractor (within the meaning of Chapter IV of Part XIII of that Act) on the making of a payment to which section 559 of that Act (deductions on account of tax) applies;
(c) any such record as may be requisite for making a correct and complete claim in respect of, or otherwise requisite for making a correct and complete return so far as relating to, an amount of tax—
(i) which has been paid under the laws of a territory outside the United Kingdom, or
(ii) which would have been payable under the law of such a territory but for a relief to which section 788(5) of the principal Act (relief for promoting development and relief contemplated by double taxation arrangements) applies.”
(4) In subsection (5) of that section (penalty for failure to comply with section 12B(1) or (2A)) for “Subject to subsection (5A)” there shall be substituted “Subject to subsections (5A) and (5B)”.
(5) After subsection (5A) of that section there shall be inserted—
“(5B) Subsection (5) above also does not apply where—
(a) the records which the person fails to keep or preserve are records falling within paragraph (a) of subsection (4A) above; and
(b) an officer of the Board is satisfied that any facts which he reasonably requires to be proved, and which would have been proved by the records, are proved by other documentary evidence furnished to him.”
(6) In Schedule 1A (claims etc not included in returns) in paragraph 2A (keeping and preserving of records) in sub-paragraph (3) (which makes corresponding provision to section 12B(4)) at the beginning there shall be inserted “Except in the case of records falling within section 12B(4A) of this Act,”.
(7) In sub-paragraph (4) of that paragraph (penalty for failure to comply with paragraph 2A(1)) at the beginning there shall be inserted “Subject to sub-paragraph (5) below,”.
(8) After that sub-paragraph there shall be inserted—
“(5) Sub-paragraph (4) above does not apply where—
(a) the records which the person fails to keep or preserve are records falling within paragraph (a) of section 12B(4A) of this Act; and
(b) an officer of the Board is satisfied that any facts which he reasonably requires to be proved, and which would have been proved by the records, are proved by other documentary evidence furnished to him.”
(9) The amendments made by this section shall not have effect in relation to—
(a) any time before this Act is passed, or
(b) any records which a person fails to preserve before this Act is passed.
(1) For subsection (1) of section 28C of the [1970 c. 9.] Taxes Management Act 1970 (determination of tax where no return delivered) there shall be substituted the following subsections—
“(1) This section applies where—
(a) a notice has been given to any person under section 8 or 8A of this Act (the relevant section), and
(b) the required return is not delivered on or before the filing date.
(1A) An officer of the Board may make a determination of the following amounts, to the best of his information and belief, namely—
(a) the amounts in which the person who should have made the return is chargeable to income tax and capital gains tax for the year of assessment; and
(b) the amount which is payable by him by way of income tax for that year;
and subsection (1AA) of section 8 or, as the case may be, section 8A of this Act applies for the purposes of this subsection as it applies for the purposes of subsection (1) of that section.”
(2) In subsection (3) of that section the words “or 11AA” shall cease to have effect.
(3) In subsection (6) of that section for the words “, section 8A(1A) or, as the case may be, section 11(4)” there shall be substituted the words “or, as the case may be, section 8A(1A)”.
(4) After subsection (5) of section 59B of that Act (payment of income tax and capital gains tax) there shall be inserted the following subsection—
“(5A) Where a determination under section 28C of this Act which has effect as a person’s self-assessment is superseded by his self-assessment under section 9 of this Act, any amount of tax which is payable or repayable by virtue of the supersession shall be payable or (as the case may be) repayable on or before the day given by subsection (3) or (4) above.”
(1) After subsection (9) of section 59A of the Taxes Management Act 1970 (payments on account of income tax) there shall be inserted the following subsection—
“(10) Regulations under section 203 of the principal Act (PAYE) may provide that, for the purpose of determining the amount of any such excess as is mentioned in subsection (1) above, any necessary adjustments in respect of matters prescribed by the regulations shall be made to the amount of tax deducted at source under that section.”
(2) After subsection (7) of section 59B of that Act (payment of income tax and capital gains tax) there shall be inserted the following subsection—
“(8) Regulations under section 203 of the principal Act (PAYE) may provide that, for the purpose of determining the amount of the difference mentioned in subsection (1) above, any necessary adjustments in respect of matters prescribed by the regulations shall be made to the amount of tax deducted at source under that section.”
After subsection (4) of section 59B of the [1970 c. 9.] Taxes Management Act 1970 (payment of income tax and capital gains tax) there shall be inserted the following subsection—
“(4A) Where in the case of a repayment the return on the basis of which the person’s self-assessment was made under section 9 of this Act is enquired into by an officer of the Board—
(a) nothing in subsection (3) or (4) above shall require the repayment to be made before the day on which, by virtue of section 28A(5) of this Act, the officer’s enquiries are treated as completed; but
(b) the officer may at any time before that day make the repayment, on a provisional basis, to such extent as he thinks fit.”
(1) In section 42 of the Taxes Management Act 1970 (procedure for making claims etc.)—
(a) subsections (3A) and (3B) (which are superseded by subsection (2) below) shall cease to have effect;
(b) in subsection (7)(a), the words “534, 535, 537A, 538” shall cease to have effect; and
(c) after subsection (11) there shall be inserted the following subsection—
“(11A) Schedule 1B to this Act shall have effect as respects certain claims for relief involving two or more years of assessment.”
(2) After Schedule 1A to that Act there shall be inserted, as Schedule 1B, the provisions set out in Schedule 17 to this Act (claims for reliefs involving two or more years).
(3) For subsection (9) of section 96 of the Taxes Act 1988 (relief for fluctuating profits of farming etc.) there shall be substituted the following subsection—
“(9) Where a person makes a claim under this section, any claim by him for relief under any other provision of the Income Tax Acts for either of the two years of assessment—
(a) shall not be out of time if made before the end of the period during which the claim under this section is capable of being revoked; and
(b) if already made, may be amended or revoked before the end of that period;
and, in relation to a claim made by being included in a return, any reference in this subsection to amending or revoking the claim is a reference to amending the return by amending or, as the case may be, omitting the claim.”
Finance Act 1996