Office of Public Sector Information
PART II continued CHAPTER I continued
Schedule 14 to this Act (which makes various amendments of the [1970 c. 9.] Taxes Management Act 1970, the Taxes Act 1988 and the [1989 c. 26.] Finance Act 1989 with a view to, or in connection with, the introduction of “pay and file”) shall have effect.
(1) The Treasury may by regulations provide, in relation to accounting periods beginning on or after 1st January 1994, for Schedule 19AB of the Taxes Act 1988 (payments on account of exempt pension business) to have effect, with such modifications and exceptions as may be specified in the regulations, in relation to any business to which this section applies as it has effect in relation to the pension business of an insurance company.
(2) This section applies to any business of a friendly society the profits arising from which are exempt from income tax and corporation tax under section 460(1), 461(1) or 461B(1) of the Taxes Act 1988 (life or endowment and other business), not being a business carried on by a friendly society all of whose profits are so exempt.
(3) Regulations under this section may make different provision for different cases.
(4) This section shall be without prejudice to section 463(1) of the Taxes Act 1988 (application of the Corporation Tax Acts to life or endowment business carried on by friendly societies).
(1) In subsection (2) of section 829 of the Taxes Act 1988 (restriction on application of Income Tax Acts to public departments), at the end there shall be inserted “unless it is tax which would not have been so borne but for a failure by a public office or department of the Crown to make a deduction required by virtue of subsection (1) above.”
(2) The provisions of Parts IX and X of the Taxes Management Act 1970 (interest and penalties) shall apply in relation to public offices and departments of the Crown for the purposes, so far as they so apply, of the other provisions of that Act and of the provisions of the Income Tax Acts mentioned in section 829(1) of the Taxes Act 1988.
(3) This section shall have effect in relation to the year 1993-94 and subsequent years of assessment.
(1) The following section shall be inserted after section 577 of the Taxes Act 1988—
(1) In computing profits or gains chargeable to tax under Schedule A or Schedule D, no deduction shall be made for any expenditure incurred in making a payment the making of which constitutes the commission of a criminal offence.
(2) Such expenditure shall not be included in computing any expenses of management in respect of which relief may be given under the Tax Acts.”
(2) This section shall apply in relation to expenditure incurred on or after 11th June 1993.
(1) Section 200 of the Taxes Act 1988 (expenses of Members of Parliament) shall become subsection (1) of that section and the following subsection shall be inserted after that subsection—
“(2) A sum which is paid to a Member of the House of Commons in accordance with any resolution of that House providing for Members of that House to be reimbursed in respect of the cost of, and any additional expenses incurred in, travelling between the United Kingdom and any European Community institution in Brussels, Luxembourg or Strasbourg shall not be regarded as income for any purpose of the Income Tax Acts.”
(2) This section shall apply in relation to sums paid on or after 1st January 1992.
(3) Any such adjustment (whether by way of discharge or repayment of tax, the making of an assessment or otherwise) as is appropriate in consequence of this section may be made.
(1) Subsection (2) below applies where a qualifying company holds a qualifying asset and there is a difference between—
(a) the local currency equivalent, at the translation time with which an accrual period as regards the asset begins, of the basic valuation of the asset, and
(b) the local currency equivalent, at the translation time with which the accrual period ends, of the basic valuation of the asset.
(2) There is as regards the asset an exchange difference for the accrual period, and—
(a) if the difference represents an increase over the period, an initial exchange gain of an amount equal to the difference accrues to the company as regards the asset for the period;
(b) if the difference represents a decrease over the period, an initial exchange loss of an amount equal to the difference accrues to the company as regards the asset for the period.
(3) Subsection (4) below applies where a qualifying company owes a qualifying liability and there is a difference between—
(a) the local currency equivalent, at the translation time with which an accrual period as regards the liability begins, of the basic valuation of the liability, and
(b) the local currency equivalent, at the translation time with which the accrual period ends, of the basic valuation of the liability.
(4) There is as regards the liability an exchange difference for the accrual period, and—
(a) if the difference represents a decrease over the period, an initial exchange gain of an amount equal to the difference accrues to the company as regards the liability for the period;
(b) if the difference represents an increase over the period, an initial exchange loss of an amount equal to the difference accrues to the company as regards the liability for the period.
(1) This section applies where a qualifying company enters into a contract (a currency contract) under which—
(a) it becomes entitled to a right and subject to a duty to receive payment at a specified time of a specified amount of one currency (the first currency), and
(b) it becomes entitled to a right and subject to a duty to pay in exchange and at the same time a specified amount of another currency (the second currency).
(2) Subsection (3) below applies if there is a difference between—
(a) the local currency equivalent, at the translation time with which an accrual period as regards the contract begins, of the amount of the first currency, and
(b) the local currency equivalent, at the translation time with which the accrual period ends, of the amount of the first currency.
(3) There is as regards the contract an exchange difference for the accrual period, and—
(a) if the difference represents an increase over the period, an initial exchange gain of an amount equal to the difference accrues to the company as regards the contract for the period;
(b) if the difference represents a decrease over the period, an initial exchange loss of an amount equal to the difference accrues to the company as regards the contract for the period.
(4) Subsection (5) below applies if there is a difference between—
(a) the local currency equivalent, at the translation time with which an accrual period as regards the contract begins, of the amount of the second currency, and
(b) the local currency equivalent, at the translation time with which the accrual period ends, of the amount of the second currency.
(5) There is as regards the contract an exchange difference for the accrual period, and—
(a) if the difference represents a decrease over the period, an initial exchange gain of an amount equal to the difference accrues to the company as regards the contract for the period;
(b) if the difference represents an increase over the period, an initial exchange loss of an amount equal to the difference accrues to the company as regards the contract for the period.
(1) In a case where—
(a) a qualifying company holds an asset consisting of a right to settlement under a qualifying debt or owes a liability consisting of a duty to settle under such a debt, and
(b) the nominal amount of the debt outstanding varies during an accrual period (whether because of an increase or a decrease or both),
the following provisions of this section shall apply for the period and section 125 above shall not.
(2) In such a case—
(a) take the local currency equivalent, at the translation time with which the accrual period begins, of the nominal amount of the debt then outstanding;
(b) take the local currency equivalent, at each time (if any) immediately after the nominal amount of the debt outstanding increases in the accrual period, of the amount by which it then increases;
(c) take the local currency equivalent, at each time (if any) immediately after the nominal amount of the debt outstanding decreases in the accrual period, of the amount by which it then decreases;
(d) take the figure found under paragraph (a) above, add each figure found under paragraph (b) above, subtract each figure found under paragraph (c) above, and call the resulting figure the first amount;
(e) take the local currency equivalent, at the translation time with which the accrual period ends, of the nominal amount of the debt then outstanding, and call the figure so found the second amount.
(3) Where the qualifying company has a right to settlement under the debt the following provisions apply in relation to the asset consisting of the right—
(a) if the second amount exceeds the first an initial exchange gain of an amount equal to the difference between them accrues to the company as regards the asset for the accrual period;
(b) if the second amount is less than the first an initial exchange loss of an amount equal to the difference between them accrues to the company as regards the asset for the accrual period.
(4) Where the qualifying company has a duty to settle under the debt the following provisions apply in relation to the liability consisting of the duty—
(a) if the second amount is less than the first an initial exchange gain of an amount equal to the difference between them accrues to the company as regards the liability for the accrual period;
(b) if the second amount exceeds the first an initial exchange loss of an amount equal to the difference between them accrues to the company as regards the liability for the accrual period.
(5) If the first amount has a negative value, for the purposes of this section the second amount (however small its value) shall be taken to exceed the first amount (however large its value).
(6) Subsection (7) below modifies the preceding provisions of this section in their application to an asset or liability where there is a difference between—
(a) the basic valuation of the asset or liability, and
(b) the nominal amount of the debt outstanding at the translation time with which the accrual period begins.
(7) In such a case—
(a) the reference in subsection (2)(a) above to the nominal amount of the debt outstanding shall be taken to be a reference to the basic valuation of the asset or liability;
(b) the reference in subsection (2)(c) above to the amount by which the nominal amount of the debt outstanding decreases shall be taken to be a reference to the amount found under subsection (8) below;
(c) the reference in subsection (2)(e) above to the nominal amount of the debt outstanding shall be taken to be a reference to the amount found under subsection (10) below.
(8) The amount referred to in subsection (7)(b) above is the amount given by the formula—
(9) For the purposes of subsection (8) above—
A is the basic valuation of the asset or liability;
B is the amount by which, at the time of the decrease mentioned in subsection (2)(c) above, the nominal amount of the debt outstanding then decreases;
C is the nominal amount of the debt outstanding at the translation time with which the accrual period begins.
(10) The amount referred to in subsection (7)(c) above is the amount given by the formula—
D + E - F
(11) For the purposes of subsection (10) above—
D is the basic valuation of the asset or liability;
E is the amount (if any) by which the nominal amount of the debt outstanding has at any time increased in the accrual period or, if it has increased more than once, the aggregate of such amounts;
F is the amount (if any) found under subsection (8) above or, if the nominal amount of the debt outstanding has decreased more than once in the accrual period, the aggregate of the amounts so found.
(1) Subsections (2) to (4) below apply where—
(a) as regards an asset, liability or contract an initial exchange gain accrues to a qualifying company for an accrual period, and
(b) at any time in the period the asset or contract was held, or the liability was owed, by the company for the purposes of a trade or part of a trade carried on by it.
(2) If throughout the accrual period the asset or contract was held, or the liability was owed, by the company solely for the purposes of the trade or part the whole of the gain is an exchange gain of the trade or part for the period.
(3) In any other case the gain shall be apportioned on a just and reasonable basis and so much as is attributable to the trade or part is an exchange gain of the trade or part for the period.
(4) The company shall be treated for the purposes of the Tax Acts as—
(a) receiving in respect of the trade or part an amount equal to the exchange gain of the trade or part for the accrual period, and
(b) receiving the amount in respect of the accounting period which constitutes the accrual period or in which the accrual period falls.
(5) Subsections (6) to (8) below apply where—
(a) as regards an asset, liability or contract an initial exchange loss accrues to a qualifying company for an accrual period, and
(b) at any time in the period the asset or contract was held, or the liability was owed, by the company for the purposes of a trade or part of a trade carried on by it.
(6) If throughout the accrual period the asset or contract was held, or the liability was owed, by the company solely for the purposes of the trade or part the whole of the loss is an exchange loss of the trade or part for the period.
(7) In any other case the loss shall be apportioned on a just and reasonable basis and so much as is attributable to the trade or part is an exchange loss of the trade or part for the period.
(8) The company shall be treated for the purposes of the Tax Acts as—
(a) incurring in the trade or part a loss of an amount equal to the exchange loss of the trade or part for the accrual period, and
(b) incurring the loss in respect of the accounting period which constitutes the accrual period or in which the accrual period falls.
(9) For the purposes of this section a part of a trade is any part of a trade whose basic profits or losses for the relevant accounting period are by virtue of regulations under section 94 above to be computed and expressed in a particular currency for the purposes of corporation tax; and the relevant accounting period is the accounting period which constitutes the accrual period concerned or in which that accrual period falls.
(10) The preceding provisions of this section apply—
(a) whether the asset or contract is at any time held, or the liability is at any time owed, on revenue account or capital account, and
(b) notwithstanding anything in section 74 of the Taxes Act 1988 (general rules as to deductions not allowable).
(11) In a case where—
(a) an accounting period of a qualifying company begins on or after its commencement day, and
(b) but for this subsection, a gain or loss falling within subsection (12) below would be taken into account in calculating for the purposes of corporation tax the profits or losses for the period of a trade carried on by the company,
the gain or loss shall be left out of account in calculating the profits or losses.
(12) A gain or loss falls within this subsection if it—
(a) accrues to the company, otherwise than by virtue of this Chapter, as regards a qualifying asset or liability or a currency contract, and
(b) is attributable to fluctuations in currency exchange rates;
and it is immaterial whether the gain or loss is realised.
(1) In a case where—
(a) as regards an asset, liability or contract an initial exchange gain accrues to a qualifying company for an accrual period, and
(b) the whole or part of the gain is not an exchange gain of a trade or part of a trade for the period,
the whole or part (as the case may be) is a non-trading exchange gain for the period.
(2) The company shall be treated as—
(a) receiving in respect of the asset, liability or contract an amount equal to the non-trading exchange gain for the accrual period, and
(b) receiving the amount in the accounting period which constitutes the accrual period or in which the accrual period falls;
and (subject to subsection (6) below) the rules in sections 130 to 133 below shall apply.
(3) In a case where—
(a) as regards an asset, liability or contract an initial exchange loss accrues to a qualifying company for an accrual period, and
(b) the whole or part of the loss is not an exchange loss of a trade or part of a trade for the period,
the whole or part (as the case may be) is a non-trading exchange loss for the period.
(4) The company shall be treated as—
(a) incurring in respect of the asset, liability or contract a loss of an amount equal to the non-trading exchange loss for the accrual period, and
(b) incurring the loss in the accounting period which constitutes the accrual period or in which the accrual period falls;
and (subject to subsection (6) below) the rules in sections 130 to 133 below shall apply.
(5) For the purposes of subsection (6) below and sections 130 to 133 below, in relation to an accounting period—
(a) amount A is the amount a company is treated as receiving in the accounting period by virtue of this section or (if it is treated as so receiving two or more amounts) the aggregate of those amounts;
(b) amount B is the amount of the loss a company is treated as incurring in the accounting period by virtue of this section or (if it is treated as so incurring two or more losses) the aggregate of the amounts of those losses.
(6) In a case where—
(a) a company is treated as receiving in an accounting period an amount or amounts by virtue of this section,
(b) it is treated as incurring in the accounting period a loss or losses by virtue of this section, and
(c) amount A is equal to amount B,
the rules in sections 130 to 133 below shall not apply.
(7) In a case where—
(a) a non-trading exchange gain or loss would (apart from this subsection) accrue as regards an asset consisting of a right to settlement under a qualifying debt, and
(b) the right is a right to receive income (whether interest, dividend or otherwise),
the non-trading exchange gain or loss shall be treated as not accruing.
(8) In a case where—
(a) a non-trading exchange gain or loss would (apart from this subsection) accrue to a company as regards a liability consisting of a duty to settle under a qualifying debt, and
(b) a charge is allowed to the company in respect of the debt under section 338 of the Taxes Act 1988 (allowance of charges on income and capital) or the circumstances are such that a charge would be so allowed if the duty were settled,
the non-trading exchange gain or loss shall be treated as not accruing.
(9) Section 396 of the Taxes Act 1988 (Case VI losses) shall not be taken to apply to a loss which a company is treated as incurring by virtue of this section; and an amount which a company is treated as receiving by virtue of this section shall not be regarded, for the purposes of subsection (1) of section 396, as income arising as mentioned in that subsection.
(1) Subsection (2) below applies where—
(a) a company is treated as receiving in an accounting period an amount or amounts by virtue of section 129 above, and
(b) it is not treated as incurring in the accounting period any loss by virtue of that section.
(2) The company shall be treated as receiving in the accounting period annual profits or gains of an amount equal to amount A, and the profits or gains shall be chargeable to tax under Case VI of Schedule D for the accounting period.
(3) Subsection (4) below applies where—
(a) a company is treated as receiving in an accounting period an amount or amounts by virtue of section 129 above,
(b) it is treated as incurring in the accounting period a loss or losses by virtue of that section, and
(c) amount A exceeds amount B.
(4) The company shall be treated as receiving in the accounting period annual profits or gains of an amount equal to amount A minus amount B, and the profits or gains shall be chargeable to tax under Case VI of Schedule D for the accounting period.
(1) This section applies where—
(a) a company is treated as incurring in an accounting period a loss or losses by virtue of section 129 above, and
(b) it is not treated as receiving in the accounting period any amount by virtue of that section;
and where this section applies by virtue of this subsection references to the relievable amount for the accounting period are to an amount equal to amount B.
(2) This section also applies where—
(a) a company is treated as incurring in an accounting period a loss or losses by virtue of section 129 above,
(b) it is treated as receiving in the accounting period an amount or amounts by virtue of that section, and
(c) amount B exceeds amount A;
and where this section applies by virtue of this subsection references to the relievable amount for the accounting period are to an amount equal to amount B minus amount A.
(3) The company may claim under this subsection that the whole or part of the relievable amount for an accounting period shall be treated for the purposes of section 403(1) of the Taxes Act 1988 (group relief) as if it were a loss incurred by the company in the period in carrying on a trade, and in such a case section 403(2) (exclusions) shall not apply.
(4) The company may claim under this subsection that the whole or part of the relievable amount for an accounting period shall be set off for the purposes of corporation tax against profits (of whatever description) of that accounting period; and in such a case, subject to any relief for a loss incurred in a trade in an earlier accounting period, those profits shall then be treated as reduced accordingly.
(5) Where a company has made no claim under subsection (3) or (4) above as regards the relievable amount for an accounting period, the company may claim under this subsection that—
(a) the whole of the relievable amount, or
(b) where the relievable amount exceeds the relevant exchange profits, so much of the relievable amount as is equal to those profits,
shall be treated as mentioned in subsection (7) below.
(6) Where a company has made a claim under subsection (3) or (4) above as regards the relievable amount for an accounting period, the company may claim under this subsection that—
(a) such part of the relievable amount as is not the subject of any such claim, or
(b) where that part exceeds the relevant exchange profits, so much of that part as is equal to those profits,
shall be treated as mentioned in subsection (7) below.
(7) Where a company claims under subsection (5) or (6) above as regards the whole or part of the relievable amount for an accounting period, the whole or part concerned shall be set off for the purposes of corporation tax against the exchange profits of preceding accounting periods falling wholly or partly within the permitted period; and (subject to any relief for an earlier loss) the exchange profits of any of those accounting periods shall then be treated as reduced by the whole or part concerned or by so much of it as cannot be set off under this subsection against the exchange profits of a later accounting period.
(8) For the purposes of subsections (5) and (6) above “the relevant exchange profits” means the total of the following—
(a) the exchange profits, as reduced by any reliefs for earlier losses and any reliefs falling within subsection (9) below, of all those accounting periods falling wholly within the permitted period, and
(b) such part of the exchange profits, as so reduced, of any accounting period falling partly before the beginning of the permitted period as is proportionate to the part of the accounting period falling within the permitted period.
(9) The reliefs falling within this subsection are—
(a) any relief under section 338 of the Taxes Act 1988 (charges on income) in respect of payments made wholly and exclusively for the purposes of a trade;
(b) where the company is an investment company for the purposes of Part IV of the Taxes Act 1988, any relief under that section in respect of payments made wholly and exclusively for the purposes of its business.
(10) For the purposes of subsections (7) and (8) above—
(a) the exchange profits of an accounting period are the annual profits or gains the company is treated as receiving in that period under section 130 above,
(b) the permitted period is the period of three years immediately preceding the accounting period first mentioned in subsection (7) above, and
(c) an earlier loss is a loss incurred, or treated as incurred, in an accounting period earlier than that first mentioned in subsection (7) above.
(11) The amount of the reduction that may be made under subsection (7) above in the exchange profits of an accounting period falling partly before the beginning of the permitted period shall not exceed a part of those profits proportionate to the part of the accounting period falling within the permitted period.
(12) If the whole or part of the relievable amount for an accounting period is not dealt with under a claim under this section—
(a) the company shall be treated as incurring by virtue of section 129 above a loss of an amount equal to the whole or part (as the case may be),
(b) the company shall be treated as incurring the loss in the next succeeding accounting period, and
(c) in relation to that accounting period references to amount B shall be construed accordingly.
(13) A company—
(a) may not claim under more than one of subsections (3) and (4) above as regards the same part of a relievable amount, and
(b) where it has claimed under subsection (5)(b) or (6) above as regards part of a relievable amount, may not later claim under subsection (3) or (4) above as regards any part of the relievable amount.
(14) A claim under any of subsections (3) to (6) above must be made within the period of two years immediately following the accounting period to which the relievable amount relates or within such further period as the Board may allow.
(1) This section applies where section 131(12) above treats a company as incurring a loss in an accounting period by virtue of section 129 above.
(2) In this section references to amount C are to so much of amount B as the company is treated as incurring in the accounting period otherwise than by virtue of section 131(12).
(3) Where section 131 above applies by virtue of section 131(1) and this section applies, then, as regards the accounting period—
(a) if amount C is nil section 131(3) to (6) shall not apply;
(b) if amount C exceeds nil the references to the relievable amount in section 131(3) to (7), (13) and (14) shall be construed as references to so much of that amount as equals amount C.
(4) Where section 131 above applies by virtue of section 131(2) and this section applies, then, as regards the accounting period—
(a) if amount C does not exceed amount A section 131(3) to (6) shall not apply;
(b) if amount C exceeds amount A the references to the relievable amount in section 131(3) to (7), (13) and (14) shall be construed as references to so much of that amount as equals amount C minus amount A.
(1) Section 131(4) above shall apply before section 393A(1) of the Taxes Act 1988 in relation to profits of the accounting period first mentioned in section 131(4) above.
(2) Relief shall not be given under section 131(4) above against any ring fence profits of the company; and in this subsection “ring fence profits” has the same meaning as in Chapter V of Part XII of the Taxes Act 1988.
(3) Where the company incurs a loss in a trade in the accounting period first mentioned in subsection (7) of section 131 above, that subsection shall apply after section 393A(1) of the Taxes Act 1988 in relation to exchange profits of a particular accounting period.
(4) Relief shall not be given by virtue of section 131(7) above so as to interfere with—
(a) any relief under section 338 of the Taxes Act 1988 (charges on income) in respect of payments made wholly and exclusively for the purposes of a trade, or
(b) where the company is an investment company for the purposes of Part IV of the Taxes Act 1988, any relief under that section in respect of payments made wholly and exclusively for the purposes of its business.
(5) The reference in subsection (3) above to exchange profits of an accounting period shall be construed in accordance with section 131(10) above.
Schedule 15 to this Act (which provides for the amount of an initial exchange gain or loss to be found in accordance with an alternative method of calculation in certain cases) shall have effect.
Finance Act 1993