Office of Public Sector Information
PART III continued CHAPTER I continued
(1) This section applies where tax is charged in accordance with section 650A of the Taxes Act (tax charged on the withdrawal of the Board’s approval in relation to approved personal pension arrangements).
(2) For the purposes of this Act the appropriate part of the assets which at the relevant time are held for the purposes of the relevant scheme—
(a) shall be deemed to be acquired at that time for a consideration equal to the amount on which tax is charged by virtue of section 650A(2) of the Taxes Act; but
(b) shall not be deemed to be disposed of by any person at that time.
(3) The person who shall be deemed in accordance with subsection (2)(a) above to have acquired the appropriate part of the assets shall be the person who would be chargeable in respect of a chargeable gain accruing on a disposal of the assets at the relevant time.
(4) In this section—
“the appropriate part” and “the relevant time” have the meanings given by subsection (3) of section 650A of the Taxes Act for the purposes of subsection (2) of that section; and
“the relevant scheme” has the same meaning as in that section.”
(4) This section has effect in relation to any case in which the date from which the Board’s approval is withdrawn is a date on or after 17th March 1998, except a case where the notice under section 650(2) of the Taxes Act 1988 was given before that date.
(1) After section 651 of the Taxes Act 1988 there shall be inserted the following section—
(1) The Board may by regulations make any of the following provisions—
(a) provision requiring prescribed persons to furnish to the Board, at prescribed times, information relating to any of the matters mentioned in subsection (2) below;
(b) provision enabling the Board to serve a notice requiring prescribed persons to furnish to the Board, within a prescribed time, particulars relating to any of those matters;
(c) provision enabling the Board to serve a notice requiring prescribed persons to produce to the Board, within a prescribed time, documents relating to any of those matters;
(d) provision enabling the Board to serve a notice requiring prescribed persons to make available for inspection on behalf of the Board books, documents and other records, being books, documents and records which relate to any of those matters;
(e) provision requiring prescribed persons to preserve for a prescribed time books, documents and other records, being books, documents and records which relate to any of those matters.
(2) The matters referred to in subsection (1) above are—
(a) any personal pension scheme which is or has been approved; and
(b) any personal pension arrangements which are or have been approved.
(3) A person who fails to comply with regulations made under subsection (1)(e) above shall be liable to a penalty not exceeding £3,000.
(4) Regulations under this section may make different provision for different descriptions of case.
(5) In this section “prescribed” means prescribed by regulations made under this section.”
(2) Section 652 of the Taxes Act 1988 (information about payments) shall cease to have effect.
(3) In the Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties for failure to provide information etc.)—
(a) in the first column, after the entry relating to regulations under section 639 of the Taxes Act 1988 there shall be inserted the following entry—
“regulations under section 651A(1)(b) to (d);”;
(b) in that column, the entry relating to section 652 of the Taxes Act 1988 shall be omitted; and
(c) in the second column, after the entry relating to regulations under section 639 of the Taxes Act 1988 there shall be inserted the following entry—
“regulations under section 651A(1)(a);”.
(4) Subsections (2) and (3)(b) above shall come into force on such day as the Treasury may by order appoint.
(1) After section 653 of the Taxes Act 1988 there shall be inserted the following section—
(1) Where—
(a) the Board, or any officer of the Board, is authorised or required by or in consequence of any provision of this Chapter to give a notice to the person who is the scheme administrator of a personal pension scheme, but
(b) there is for the time being no scheme administrator for that scheme or the person who is the scheme administrator for that scheme cannot be traced,
that power or duty may be exercised or performed by giving that notice, instead, to the person specified in subsection (2) below.
(2) That person is—
(a) the person who established the scheme; or
(b) any person by whom that person has been directly or indirectly succeeded in relation to the provision of benefits under the scheme.
(3) The giving of a notice in accordance with this section shall have the same effect as the giving of that notice to the scheme administrator and, without prejudice to section 650A(5), shall not impose an additional obligation or liability on the person to whom the notice is actually given.”
(2) This section has effect in relation to the giving of notices at any time on or after the day on which this Act is passed.
(1) Part XIV of the Taxes Act 1988 (pension schemes etc.) shall have effect, and shall be deemed always to have had effect, with the following section inserted as the first section of Chapter VI of that Part—
(1) Tax charged under Chapter I or IV of this Part on the administrator of a scheme—
(a) shall be treated as charged on every relevant person and be assessable by the Board in the name of the administrator of the scheme, but
(b) shall not be assessable on any relevant person who, at the time of the assessment, is no longer either the administrator of the scheme or included in the persons who are the administrator of the scheme.
(2) For the purposes of subsection (1) above a person is a relevant person in relation to any charge to tax on the administrator of a scheme if he is a person who at the time when the charge is treated as arising or any subsequent time is, or is included in the persons who are, the administrator of the scheme.
(3) Where tax charged under Chapter I of this Part on the administrator of a scheme is assessable by virtue of section 606 or 606A on a person who is not a relevant person for the purposes of subsection (1) above, the assessment shall be made by the Board.
(4) In this section “administrator”, in relation to a scheme, means the person who is—
(a) the administrator of the scheme within the meaning given by section 611AA; or
(b) the scheme administrator, as defined in section 630.
(5) This section is without prejudice to section 591D(4).”
(2) In section 9 of the [1970 c. 9.] Taxes Management Act 1970 (self-assessment), in subsection (1), for “subsection (2)” there shall be substituted “subsections (1A) and (2)”; and after that subsection there shall be inserted the following subsection—
“(1A) The tax to be assessed on a person by a self-assessment shall not include any tax which, under Chapter I or IV of Part XIV of the principal Act, is charged on the administrator of a scheme (within the meaning of section 658A of that Act) and is assessable by the Board in accordance with that section.”
(3) Subsection (2) above shall have effect for the year 1998-99 and subsequent years of assessment and shall be deemed to have had effect for the years 1996-97 and 1997-98.
(1) In Schedule 5AA to the Taxes Act 1988 (guaranteed returns on transactions in futures and options), the following paragraph shall be inserted after paragraph 4—
4A (1) This paragraph applies where for the purposes of this Schedule—
(a) there are or, apart from section 144(2) or (3) of the 1992 Act, would be two or more related transactions;
(b) one of those transactions is or would be the creation or acquisition (by the making or receiving of a grant or otherwise) of a future or option;
(c) the other transaction, or one of the other transactions, is or would be the running of the future to delivery or the exercise of the option; and
(d) the transaction mentioned in paragraph (c) above is not treated for those purposes as a disposal of a future or option.
(2) This Schedule shall have effect in relation to the parties to the future or option as if the transaction specified in sub-paragraph (3) below—
(a) were a transaction for which the scheme or arrangements by reference to which the transactions are related transactions provided; and
(b) were a transaction which in fact takes place at the time (“the relevant time”) immediately before the future runs to delivery or, as the case may be, the option is exercised.
(3) That transaction is a disposal of the future or option which—
(a) in the case of a person whose rights and entitlements under the future or option have a market value at the relevant time, consists in a disposal for a consideration equal to that market value; and
(b) in the case of any other party to the future or option, consists in a disposal which—
(i) is made for a nil consideration; and
(ii) involves that person in incurring costs equal to the amount specified in sub-paragraph (4) below.
(4) That amount is the amount which that party to the future or option might reasonably have been expected to pay, in a transaction at arm’s length entered into at the relevant time, for the release of his obligations and liabilities under the future or option.
(5) Where, in a case in which a transaction is deemed to take place by virtue of sub-paragraph (2)(b) above (“the deemed transaction”)—
(a) any profits or gains arising from the deemed transaction are chargeable to tax under Case VI of Schedule D in accordance with paragraph 1(1) above, or
(b) any loss arising in the deemed transaction is brought into account for the purposes of section 392 or 396 in accordance with paragraph 1(5) above,
amounts taken into account or allowable as deductions in computing those profits or gains, or that loss, shall not be excluded by virtue of section 37 or 39 of the 1992 Act (exclusion of amounts taken into account or allowable for the purposes of the taxation of income and profits) from any computation made for the purposes of that Act, but paragraph 1(6) above shall be given effect to in relation to the 1992 Act in accordance with sub-paragraphs (6) to (10) below.
(6) Where there are profits or gains arising to any person (“the taxpayer”) from the deemed transaction, an increase equal to the amount of those profits or gains shall be made in the amount that would otherwise be taken for the purposes of the 1992 Act to be—
(a) the amount of the consideration for the acquisition of any asset acquired by the taxpayer by means of the future running to delivery or, as the case may be, by the exercise of the option; or
(b) the amount of the consideration for the acquisition by him of any asset disposed of by him by means of the future running to delivery or, as the case may be, in consequence of the exercise of the option;
but any increase made by virtue of paragraph (b) above in the amount of any consideration shall be disregarded in computing the amount of any indexation allowance.
(7) Where there is a loss for any person (“the taxpayer”) in the deemed transaction—
(a) a reduction equal to the smaller of the amount of the loss and the amount to be reduced shall be made in the amount that would otherwise be taken for the purposes of the 1992 Act to be the amount of the consideration mentioned in sub-paragraph (6)(a) or (b) above; and
(b) the amount (if any) by which the amount of the loss exceeds the amount to be reduced shall be deemed to be a chargeable gain accruing to the taxpayer on the occasion specified in sub-paragraph (8) below.
(8) That occasion is—
(a) in a case where the consideration mentioned in paragraph (a) of sub-paragraph (6) above has been reduced to nil, the first occasion after the acquisition mentioned in that paragraph when there is a disposal of the asset in question; and
(b) in a case where it is the consideration mentioned in sub-paragraph (6)(b) above that has been reduced to nil, the occasion of the disposal made by the taxpayer by means of the future running to delivery or, as the case may be, in consequence of the exercise of the option.
(9) For the purposes of sub-paragraphs (6) and (7) above, where in any case there is a deemed disposal of an option by the person who granted it, any determination—
(a) of the profits arising to the grantor of the option from that disposal, or
(b) of the losses for the grantor in that disposal,
shall be made as if that disposal and the disposal by which the option was granted were a single transaction.
(10) In sub-paragraph (8) above—
(a) the reference in paragraph (a) to a disposal of the asset in question includes a reference to anything that would be such a disposal but for the provisions of section 116(10) or 127 of the 1992 Act; and
(b) the references in each of paragraphs (a) and (b) to a disposal include references to a disposal which, in accordance with the 1992 Act, would (apart from sub-paragraph (7)(b) above) be a disposal on which neither a gain nor a loss accrues.
(11) In this paragraph—
“future” and “option” have the same meanings as in paragraph 4 above;
“market value” has the same meaning as in the 1992 Act;
“party”, in relation to a future or option, means one of the persons who has any right or entitlement comprised in or arising under the future or option or who is subject to any obligation or liability so comprised or arising;
and references in this paragraph to a future running to delivery are references to the discharge by performance of the obligations owed under the commodity or financial futures contract in question to the party to the future whose rights are in relation to its underlying subject matter.
(12) Sub-paragraph (3) of paragraph 3 above applies for the purposes of sub-paragraph (11) above as it applies for the purposes of that paragraph.”
(2) In paragraph 9 of that Schedule (insurance companies), for the words from the beginning to “this Schedule” there shall be substituted—
“9 (1) This paragraph applies where—
(a) any determination falls to be made under section 432A of the category of business to which any income or losses is or are referable; and
(b) that income or those losses would all be chargeable or relievable by virtue of this Schedule but for the exemptions from tax and exclusions from the provisions of this Schedule that are applicable in respect of the category of business to which it or they are determined to be referable.
(2) Section 432A shall have effect”.
(3) In that paragraph, after the sub-paragraph (2) created by virtue of subsection (2) above there shall be inserted the following sub-paragraphs—
“(3) Subject to sub-paragraphs (4) and (5) below, paragraph 4A above shall have effect as if the references in sub-paragraph (5) of that paragraph to—
(a) profits or gains arising from the deemed transaction that are chargeable to tax under Case VI of Schedule D in accordance with paragraph 1(1) above, or
(b) any loss arising in the deemed transaction that is brought into account for the purposes of section 392 or 396 in accordance with paragraph 1(5) above,
were references to all the income or losses in relation to which the determination mentioned in sub-paragraph (1) above falls to be made.
(4) Sub-paragraph (6) of paragraph 4A above shall not apply in relation to the amount of the consideration for the acquisition of any asset acquired by the taxpayer by means of the future running to delivery or, as the case may be, by the exercise of the option if—
(a) immediately before the time of the deemed transaction, the future or option is an asset within one of the categories set out in section 440(4); and
(b) immediately after its acquisition, the asset acquired is within another of those categories.
(5) Sub-paragraph (6) of paragraph 4A above shall not apply in relation to the amount of the consideration for the acquisition of any asset disposed of by the taxpayer by means of the future running to delivery or, as the case may be, by the exercise of the option if—
(a) immediately before the time of the deemed transaction, the future or option is an asset within one of the categories set out in section 440(4); and
(b) immediately before its disposal, the asset disposed of is within another of those categories.
(6) Where any future or option would not fall (apart from this sub-paragraph) to be treated as an asset for the purposes of section 440, any question for the purposes of this paragraph whether it is an asset within any of the categories set out in subsection (4) of that section shall be determined as if it were an asset.
(7) Expressions used in this paragraph and in paragraph 4A above have the same meanings in this paragraph as in that paragraph.”
(4) In paragraph 4(6) of that Schedule, in the definition of “option”, after paragraph (b) there shall be inserted— “and includes any liability or entitlement under an option.”
(5) This section applies where the transaction consisting in the future running to delivery or the exercise of the option takes place on or after 6th February 1998.
(1) In subsection (1) of section 1A of the Taxes Act 1988 (rate of income tax applicable to income from savings and distributions), for “and 686,” there shall be substituted “, 686 and 720(5),”.
(2) In subsection (2) of that section, after paragraph (a) there shall be inserted the following paragraph—
“(aa) any amount chargeable to tax under Case VI of Schedule D by virtue of section 714, 716 or 723;”
(3) Subsections (1) and (2) above apply for the year 1998-99 and subsequent years of assessment.
(1) Section 471 of the Taxes Act 1988 (exchange of securities in connection with conversion operations, nationalisation etc.) shall cease to have effect.
(2) Section 472 of that Act (distribution of securities issued in connection with nationalisation etc.) shall cease to have effect.
(3) Subsection (1) above applies in relation to exchanges made after the day on which this Act is passed.
(4) Subsection (2) above applies in relation to issues of securities occurring after that day.
(1) In section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions) in subsection (1), after “Subject to sections” there shall be inserted “231AA,” and after that section there shall be inserted—
(1) A person shall not be entitled to a tax credit under section 231 in respect of a qualifying distribution if—
(a) he is the borrower under a stock lending arrangement or the interim holder under a repurchase agreement;
(b) the qualifying distribution is, or is a payment representative of, a distribution in respect of securities to which the arrangement or agreement relates; and
(c) a manufactured dividend representative of that distribution is paid by that person in respect of securities to which the arrangement or agreement relates.
(2) In this section “stock lending arrangement” has the same meaning as in section 263B of the 1992 Act and, in relation to any such arrangement, any reference to the borrower, or the securities to which the arrangement relates, shall be construed accordingly.
(3) For the purposes of this section the cases where there is a repurchase agreement are the following—
(a) any case falling within subsection (1) of section 730A; and
(b) any case which would fall within that subsection if the sale price and the repurchase price were different;
and, in any such case, any reference to the interim holder, or the securities to which the agreement relates, shall be construed accordingly.
(4) For the purposes of this section “manufactured dividend” has the same meaning as in paragraph 2 of Schedule 23A (and any reference to a manufactured dividend being paid accordingly includes a reference to a payment falling by virtue of section 736B(2) or 737A(5) to be treated for the purposes of Schedule 23A as if it were made).”
(2) In section 231 of the Taxes Act 1988, in subsection (1), after “231AA,” there shall be inserted “231AB,” and after section 231AA of that Act there shall be inserted—
(1) A person shall not be entitled to a tax credit under section 231 in respect of a qualifying distribution if—
(a) he is the original owner under a repurchase agreement;
(b) the qualifying distribution is a manufactured dividend paid to that person by the interim holder under the repurchase agreement in respect of securities to which the agreement relates; and
(c) the repurchase agreement is not such that the actual dividend which the manufactured dividend represents is receivable otherwise than by the original owner.
(2) For the purposes of this section the cases where there is a repurchase agreement are the following—
(a) any case falling within subsection (1) of section 730A; and
(b) any case which would fall within that subsection if the sale price and the repurchase price were different;
and, in any such case, any reference to the original owner, the interim holder, or the securities to which the agreement relates, shall be construed accordingly.
(3) Subsection (4) of section 231AA applies for the purposes of this section as it applies for the purposes of that section.”
(3) In section 737D of the Taxes Act 1988 (power by regulations to provide for manufactured payments to be eligible for relief) in subsection (2) (which defines manufactured payment as any manufactured dividend etc) the words “manufactured dividend” shall cease to have effect.
(4) Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) shall be amended in accordance with subsections (5) to (8) below.
(5) In paragraph 2 (UK equities) for sub-paragraph (2) there shall be substituted—
“(2) Where a manufactured dividend is paid by a dividend manufacturer who is a company resident in the United Kingdom, the Tax Acts shall have effect—
(a) in relation to the recipient, and persons claiming title through or under him, as if the manufactured dividend were a dividend on the UK equities in question; and
(b) in relation to the dividend manufacturer, as if the amount paid were a dividend of his.”
(6) In paragraph 2(3) (manufactured dividends to which paragraph 2(2) does not apply) paragraph (a) (duty to account for notional ACT) shall cease to have effect.
(7) In paragraph 2(6) (written statement in respect of certain manufactured dividends) in paragraph (a), after “a dividend manufacturer pays a manufactured dividend” there shall be inserted “to which sub-paragraph (3) above applies”.
(8) In consequence of subsection (6) above, the following provisions shall also cease to have effect—
(a) in paragraph 2, sub-paragraphs (4) and (5) and, in sub-paragraph (6), paragraph (b) and the word “and” immediately preceding it; and
(b) in paragraph 2A (deductibility of manufactured payment in the case of the manufacturer) in sub-paragraph (1), the words “together with an amount equal to the notional ACT” and sub-paragraph (3).
(9) Subsection (1) above has effect in relation to qualifying distributions made on or after 8th April 1998 if the manufactured dividend representative of the distribution is paid (or treated for the purposes of Schedule 23A to the Taxes Act 1988 as paid) on or after 6th April 1999.
(10) Subsections (2) to (8) above have effect in relation to manufactured dividends paid (or treated for the purposes of Schedule 23A to the Taxes Act 1988 as paid) on or after 6th April 1999.
(1) For section 798 of the Taxes Act 1988 there shall be substituted the following section—
(1) This section applies where—
(a) in any chargeable period the profits of a trade carried on by a qualifying taxpayer include an amount computed in accordance with section 795 in respect of foreign interest or foreign dividends;
(b) the taxpayer is entitled in accordance with this Chapter to credit for foreign tax on the foreign interest or foreign dividends; and
(c) in the case of foreign dividends, the foreign tax mentioned in paragraph (b) above is or includes underlying tax.
(2) The amount of the credit for foreign tax referred to in subsection (1)(b) above which, in accordance with this Chapter, is to be allowed against income tax or corporation tax—
(a) shall be limited by treating the amount of the foreign interest or foreign dividends (as increased or reduced under section 798A) as reduced (or further reduced) for the purposes of this Chapter by an amount equal to the taxpayer’s financial expenditure in relation to the interest or dividends (as determined in accordance with section 798B); and
(b) so far as the credit relates to foreign tax on interest or foreign tax on dividends which is not underlying tax, shall not exceed 15 per cent. of the interest or dividends, computed without regard to paragraph (a) above or to any increase or reduction under section 798A.
(3) In this section and sections 798A and 798B—
“interest”, in relation to a loan, includes any introductory or other fee or charge which is payable in accordance with the terms on which the loan is made or is otherwise payable in connection with the making of the loan;
“foreign dividends” means dividends payable out of or in respect of the stocks, funds, shares or securities of a body of persons not resident in the United Kingdom;
“foreign interest” means interest payable by a person not resident in the United Kingdom or by a government or public or local authority in a country outside the United Kingdom.
(4) In this section and section 798B “qualifying taxpayer” means, subject to subsection (5) below, a person carrying on a trade which includes the receipt of interest or dividends and is not an insurance business.
(5) Where a company which is connected or associated with a qualifying taxpayer is acting in accordance with a scheme or arrangement the purpose, or one of the main purposes, of which is to prevent or restrict the application of this section to the taxpayer—
(a) the company shall be treated for the purposes of this section as a qualifying taxpayer; and
(b) any foreign interest or foreign dividends received in pursuance of the scheme or arrangement shall be treated for those purposes as profits of a trade carried on by the company.
(6) For the purposes of this section and section 798B—
(a) section 839 applies; and
(b) subsection (10) of section 783 applies as it applies for the purposes of that section.”
(2) This section and sections 104 and 105 do not have effect in relation to foreign interest or foreign dividends paid before 1st January 1999 in pursuance of arrangements which were entered into before, and are not altered on or after, 17th March 1998.
(3) Subject to subsection (2) above, this section and sections 104 and 105 have effect in relation to foreign interest or foreign dividends paid on or after 17th March 1998.
After section 798 of the Taxes Act 1988 there shall be inserted the following section—
(1) In a case where section 798 applies—
(a) subsection (2) below applies if the foreign tax referred to in subsection (1)(b) of that section is or includes an amount of spared tax; and
(b) subsection (3) below applies if the foreign tax so referred to is or includes an amount of tax which is not spared tax.
(2) For the purposes of income tax or corporation tax, the amount which apart from this subsection would be the amount of the foreign interest or foreign dividends shall be treated as increased by so much of the spared tax as does not exceed—
(a) the amount of the spared tax for which, in accordance with any arrangements applicable to the case in question, credit falls to be given as mentioned in section 798(1)(b); or
(b) if it is less, 15 per cent. of the interest or dividends, computed without regard to any increase under this subsection.
Finance Act 1998 (C. 36)