Office of Public Sector Information
PART IV continued CHAPTER VI continued
(1) For the purposes of section 580A the provisions of an insurance policy by which insurance is provided against a qualifying risk are self-contained unless subsection (2) or (3) below applies to the provisions of that policy so far as they relate to that risk; but, in determining whether either of those subsections so applies, regard shall be had to all the persons for whose benefit insurance is provided by that policy against that risk.
(2) This subsection applies to the provisions of an insurance policy so far as they relate to a qualifying risk if—
(a) that insurance policy contains provision for the payment of benefits other than those relating to that risk;
(b) the terms of the policy so far as they relate to that risk, or the manner in which effect is given to those terms, would have been significantly different if the only benefits under the policy had been those relating to that risk; and
(c) that difference is not one relating exclusively to the fact that the amount of benefits receivable by or in respect of any person under the policy is applied for reducing the amount of other benefits payable to or in respect of that person under the policy.
(3) This subsection applies to the provisions of an insurance policy (“the relevant policy”) so far as they relate to a qualifying risk if—
(a) the insured under that policy is, or has been, the insured under one or more other policies;
(b) that other policy, or each of those other policies, is in force or has been in force at a time when the relevant policy was in force or at the time immediately before the relevant policy was entered into;
(c) the terms of the relevant policy so far as relating to that risk, or the manner in which effect is given to those terms, would have been significantly different if the other policy or policies had not been entered into; and
(d) that difference is not one relating exclusively to the fact that the amount of benefits receivable by or in respect of any person under the other policy, or any of the other policies, is applied for reducing the amount of benefits payable to or in respect of that person under the relevant policy.
(4) In subsections (2)(b) and (3)(c) above the references to the terms of a policy so far as they relate to a risk include references to the terms fixing any amount payable by way of premium or otherwise in respect of insurance against that risk.”
(2) This section has effect for the year 1996-97 and subsequent years of assessment in relation to—
(a) any payment which under the policy in question falls to be paid at any time on or after 6th April 1996; and
(b) any payment not falling within paragraph (a) above in relation to which the conditions mentioned in subsection (3)(a) and (b) below are satisfied.
(3) This section shall also be deemed to have had effect for earlier years of assessment in relation to any payment in relation to which the following conditions are satisfied, that is to say—
(a) the payment was made under a policy in relation to which the requirements of subsection (4) below were fulfilled; and
(b) the policy in question provided for the right to annual payments under the policy to cease when all the liabilities in question were discharged.
(4) The requirements of this subsection are fulfilled in relation to any policy if—
(a) the only or main purpose of the insurance under the policy was to secure that the insured would be able to meet (in whole or in part) liabilities that would or might arise from any transaction;
(b) the policy expressly identified the transaction or, as the case may be, all the transactions (whether actual or proposed) by reference to which the insurance was taken out; and
(c) none of the transactions which would or might give rise to the liabilities mentioned in paragraph (a) above could be one entered into after any of the circumstances insured against arose.
(5) In subsection (4) above “transaction” includes any arrangements for the provision of credit or for the supply of services to residential premises.
(1) Section 32 of the [1991 c. 31.] Finance Act 1991 (vocational training relief) shall be amended in accordance with the following provisions of this section.
(2) In subsection (1) (application of section) for paragraph (ca) (individual has attained school leaving age etc at time of paying for the course) there shall be substituted—
“(ca) at the time the payment is made, the individual—
(i) in a case where the qualifying course of vocational training is such a course by virtue only of paragraph (b) of subsection (10) below, has attained the age of thirty, or
(ii) in any other case, has attained school-leaving age and, if under the age of nineteen, is not a person who is being provided with full-time education at a school,”.
(3) For subsection (10) (meaning of “qualifying course of vocational training”) there shall be substituted—
“(10) In this section “qualifying course of vocational training” means—
(a) any programme of activity capable of counting towards a qualification—
(i) accredited as a National Vocational Qualification by the National Council for Vocational Qualifications; or
(ii) accredited as a Scottish Vocational Qualification by the Scottish Vocational Education Council; or
(b) any course of training which—
(i) satisfies the conditions set out in the paragraphs of section 589(1) of the Taxes Act 1988 (qualifying courses of training etc),
(ii) requires participation on a full-time or substantially full-time basis, and
(iii) extends for a period which consists of or includes four consecutive weeks,
but treating any time devoted to study in connection with the course as time devoted to the practical application of skills or knowledge.”
(4) This section applies to payments made on or after 6th May 1996.
(1) In section 278(2)(a) of the Taxes Act 1988 (exclusion of non-residents from entitlement to personal reliefs not to apply to Commonwealth citizens or citizens of the Republic of Ireland), for “a citizen of the Republic of Ireland” there shall be substituted “an EEA national”.
(2) After subsection (8) of that section (claims to be made to the Board) there shall be added the following subsection—
“(9) In this section “EEA national” means a national of any State, other than the United Kingdom, which is a Contracting Party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992, as adjusted by the Protocol signed at Brussels on 17th March 1993.”
(3) This section has effect for the year 1996-97 and subsequent years of assessment.
(1) Section 505(1) of the Taxes Act 1988 (exemptions for charities) shall be amended as follows.
(2) For paragraph (a) (rents etc.) there shall be substituted the following paragraph—
“(a) exemption from tax under Schedules A and D in respect of any profits or gains arising in respect of rents or other receipts from an estate, interest or right in or over any land (whether situated in the United Kingdom or elsewhere) to the extent that the profits or gains—
(i) arise in respect of rents or receipts from an estate, interest or right vested in any person for charitable purposes; and
(ii) are applied to charitable purposes only;”.
(3) For sub-paragraph (ii) of paragraph (c) (yearly interest and annual payments) there shall be substituted the following sub-paragraphs—
“(ii) from tax under Case III of Schedule D,
(iia) from tax under Case IV or V of Schedule D in respect of income equivalent to income chargeable under Case III of that Schedule but arising from securities or other possessions outside the United Kingdom,
(iib) from tax under Case V of Schedule D in respect of income consisting in any such dividend or other distribution of a company not resident in the United Kingdom as would be chargeable to tax under Schedule F if the company were so resident, and”.
(4) In paragraph (e) (trading profits), after “by a charity” there shall be inserted “(whether in the United Kingdom or elsewhere)”.
(5) This section has effect—
(a) for the purposes of income tax, for the year 1996-97 and subsequent years of assessment; and
(b) for the purposes of corporation tax, in relation to accounting periods ending after 31st March 1996.
(1) In section 617 of the Taxes Act 1988 (social security benefits and contributions), subsection (5) (relief for Class 4 contributions) shall cease to have effect.
(2) In consequence of the provision made by subsection (1) above, in paragraph 3(2) of Schedule 2 to—
(a) the [1992 c. 4.] Social Security Contributions and Benefits Act 1992, and
(b) the [1992 c. 7.] Social Security Contributions and Benefits (Northern Ireland) Act 1992,
the words “(e) section 617(5) (relief for Class 4 contributions);” shall be omitted.
(3) This section shall have effect in relation to the year 1996-97 and subsequent years of assessment.
(1) Income tax shall not be chargeable on any payment falling within subsection (3) or (5) below.
(2) Receipt of a payment falling within subsection (3) below shall not be regarded for the purposes of capital gains tax as the disposal of an asset.
(3) A payment falls within this subsection if it is a capital sum by way of compensation for loss suffered, or reasonably likely to be suffered, by a person in a case where that person, or some other person, acting in reliance on bad investment advice at least some of which was given during the period beginning with 29th April 1988 and ending with 30th June 1994,—
(a) has, while eligible, or reasonably likely to become eligible, to be a member of an occupational pension scheme, instead become a member of a personal pension scheme or entered into a retirement annuity contract;
(b) has ceased to be a member of, or to pay contributions to, an occupational pension scheme and has instead become a member of a personal pension scheme or entered into a retirement annuity contract;
(c) has transferred to a personal pension scheme accrued rights of his under an occupational pension scheme; or
(d) has ceased to be a member of an occupational pension scheme and has instead (by virtue of such a provision as is mentioned in section 591(2)(g) of the Taxes Act 1988) entered into arrangements for securing relevant benefits by means of an annuity contract.
(4) A payment chargeable to income tax apart from subsection (1) above may nevertheless be regarded as a capital sum for the purpose of determining whether it falls within subsection (3) above.
(5) A payment falls within this subsection if and to the extent that it is a payment of interest, on the whole or any part of a capital sum such as is mentioned in subsection (3) above, for a period ending on or before the earliest date on which a determination (whether or not subsequently varied on an appeal or in any other proceedings) of the amount of the particular capital sum in question is made, whether by agreement or by a decision of—
(a) a court, tribunal or commissioner,
(b) an arbitrator or (in Scotland) arbiter, or
(c) any other person appointed for the purpose.
(6) In this section—
“bad investment advice” means investment advice in respect of which an action against the person who gave it has been, or may be, brought—
in or for negligence;
for breach of contract;
by reason of a breach of a fiduciary obligation; or
by reason of a contravention which is actionable under section 62 of the [1986 c. 60.] Financial Services Act 1986;
“investment advice” means advice such as is mentioned in paragraph 15 of Schedule 1 to the [1986 c. 60.] Financial Services Act 1986;
“occupational pension scheme” means—
a scheme approved, or being considered for approval, under Chapter I of Part XIV of the Taxes Act 1988 (retirement benefit schemes);
a relevant statutory scheme, as defined in section 611A(1) of that Act; or
a fund to which section 608 of that Act applies (superannuation funds approved before 6th April 1980 etc);
“personal pension scheme” has the meaning given by section 630(1) of the Taxes Act 1988;
“relevant benefits” has the meaning given by section 612(1) of the Taxes Act 1988;
“retirement annuity contract” means a contract made before 1st July 1988 and approved by the Board under or by virtue of any provision of Chapter III of Part XIV of the Taxes Act 1988.
(7) This section shall have effect, and be taken always to have had effect, in relation to any payment falling within subsection (3) or (5) above, whether made before or after the passing of this Act.
(1) Section 347A of the Taxes Act 1988 (annual payments not a charge on the income of a payer) shall apply to any payment made on or after 6th April 1996—
(a) in pursuance of any obligation which falls within section 36(4)(a) of the [1988 c. 39.] Finance Act 1988 (existing obligations under certain court orders), and
(b) for the benefit, maintenance or education of a person (whether or not the person to whom the payment is made) who attained the age of 21 before 6th April 1994,
as if that obligation were not an existing obligation within the definition contained in section 36(4) of the Finance Act 1988.
(2) Subsection (1) above does not apply to any payment to which section 38 of the Finance Act 1988 (treatment of certain maintenance payments under existing obligations) applies.
(1) The sections set out in Schedule 26 to this Act shall be inserted after section 329 of the [1995 c. 4.] Taxes Act 1988.
(2) The first of those sections supersedes sections 329A and 329B inserted by the Finance Act 1995 and applies to payments received after the passing of this Act irrespective of when the agreement or order referred to in that section was made or took effect.
(3) Subsections (1) and (2) of the second of those sections supersede section 329C inserted by the [1995 c. 53.] Criminal Injuries Compensation Act 1995 and apply to payments received after the passing of that Act.
(4) The repeal of sections 329A and 329B does not affect the operation of those sections in relation to payments received before the passing of this Act.
(1) The Treasury may by order make provision for the Income Tax Acts to have effect in relation to any amount of benefit payable by virtue of a Government pilot scheme as if it was, as they think fit, either—
(a) wholly or partly exempt from income tax and, accordingly, to be disregarded in computing the amount of any receipts brought into account for income tax purposes; or
(b) to the extent specified in the order, to be brought into account for the purposes of income tax as income of a description so specified or as a receipt of a description so specified.
(2) The Treasury may by order provide for any amount of benefit payable by virtue of a Government pilot scheme to be left out of account, to the extent specified in the order, in the determination for the purposes of section 153 of the [1990 c. 1.] Capital Allowances Act 1990 (subsidies etc.) of how far any expenditure has been or is to be met directly or indirectly by the Crown or by an authority or person other than the person actually incurring it.
(3) In this section “Government pilot scheme” means any arrangements (whether or not contained in a scheme) which—
(a) are made, under any enactment or otherwise, by the Secretary of State or any Northern Ireland department;
(b) make provision for or about the payment of amounts of benefit either—
(i) for purposes that are similar to those for which any social security or comparable benefit is payable; or
(ii) for purposes connected with the carrying out of any functions of the Secretary of State or any such department in relation to employment or training for employment;
(c) are arrangements relating to a temporary experimental period; and
(d) are made wholly or partly for the purpose of facilitating a decision as to whether, or to what extent, it is desirable for provision to be made on a permanent basis for or in relation to any benefit.
(4) In subsection (3)(b) above the reference to making provision for or about the payment of amounts of benefit for purposes that are similar to those for which any social security or comparable benefit is payable shall include a reference to making provision by virtue of which there is a modification of the conditions of entitlement to, or the conditions for the payment of, an existing social security or comparable benefit.
(5) An order under this section may—
(a) make different provision for different cases, and
(b) contain such incidental, supplemental, consequential and transitional provision (including provision modifying provision made by or under the Income Tax Acts) as the Treasury may think fit.
(6) In this section “benefit” includes any allowance, grant or other amount the whole or any part of which is payable directly or indirectly out of public funds.
(7) The power to make an order under this section—
(a) shall be exercisable for the year 1996-97 and subsequent years of assessment; and
(b) so far as exercisable for the year 1996-97, shall be exercisable in relation to benefits, allowances and other amounts paid at times on or after 6th April 1996 but before the making of the order.
(8) The Treasury shall not make an order under this section containing any such provision as is mentioned in subsection (1)(b) above unless a draft of the order has been laid before, and approved by a resolution of, the House of Commons.
(1) The Income Tax Acts shall have effect, and be deemed always to have had effect, as if jobfinder’s grant were exempt from income tax and, accordingly, were to be disregarded in computing the amount of any receipts brought into account for income tax purposes.
(2) In this section “jobfinder’s grant” means grant paid under that name by virtue of arrangements made in pursuance of section 2 of the [1973 c. 50.] Employment and Training Act 1973 or section 1 of the [1950 c. 29 (N.I.).] Employment and Training Act (Northern Ireland) 1950 (arrangements for assisting persons to select, train for, obtain or retain employment).
Schedule 27 to this Act (which makes provision relating to foreign income dividends) shall have effect.
(1) The modifications which, under section 60 of the [1940 c. 29.] Finance Act 1940, may be made for the purposes of any issue of securities to the conditions about tax exemption specified in section 22 of the [1931 c. 49.] Finance (No. 2) Act 1931 shall include a modification by virtue of which the tax exemption contained in any condition of the issue applies, as respects capital, irrespective of where the person with the beneficial ownership of the securities is domiciled.
(2) Subject to subsections (3) to (5) below, nothing in the Tax Acts shall impose any charge to tax on any person in respect of so much of any profits or gains arising from a FOTRA security, or from any loan relationship represented by a FOTRA security, as is expressed to be exempt from tax in the tax exemption condition applying to that security.
(3) Exemption from tax shall not be conferred by virtue of subsection (2) above in relation to any security unless the requirements imposed as respects that exemption by the conditions with which the security is issued (including any requirement as to the making of a claim) are complied with.
(4) The tax exemption condition of a FOTRA security shall not be taken to confer any exemption from any charge to tax imposed by virtue of the provisions of Chapter IA of Part XV or Chapter III of Part XVII of the Taxes Act 1988 (anti-avoidance provisions for residents etc.)
(5) Nothing in this section shall entitle any person to any repayment of tax which he has not claimed within the time limit which would be applicable under the Tax Acts (apart from this section) to a claim for the repayment of that tax.
(6) A person with the beneficial ownership of a FOTRA security who would, by virtue of this section, be exempt from tax in respect of some or all of the profits and gains arising from that security, or from any loan relationship represented by it, shall not be entitled for the purposes of income tax or corporation tax to bring into account any amount—
(a) in respect of changes in the value of that security;
(b) as expenses or disbursements incurred in, or in connection with, the holding of the security or any transaction relating to the security; or
(c) as a debit given, in respect of any loan relationship represented by that security, by any provision of Chapter II of this Part of this Act in respect of such a relationship.
(7) Schedule 28 to this Act (which contains amendments consequential on the provisions of this section) shall have effect.
(8) References in this section to a FOTRA security are references to—
(a) any security issued with such a condition about exemption from taxation as is authorised in relation to its issue by virtue of section 22 of the [1931 c. 49.] Finance (No. 2) Act 1931; or
(b) any 3½% War Loan 1952 Or After which was issued with a condition authorised by virtue of section 47 of the [1915 c. 89.] Finance (No. 2) Act 1915;
and references, in relation to such a security, to the tax exemption condition shall be construed accordingly.
(9) This section and Schedule 28 to this Act shall have effect—
(a) for the purposes of income tax, for the year 1996-97 and subsequent years of assessment; and
(b) for the purposes of corporation tax, for accounting periods ending after 31st March 1996.
After section 51 of the Taxes Act 1988 there shall be inserted the following section—
A direction under section 50 or 51 that any security shall be deemed to have been issued subject to the condition that the interest thereon shall be paid without deduction of tax may provide that the direction is to have effect in relation only to payments of interest made on or after such date as may be specified in the direction.”
Schedule 29 to this Act (which amends the rules relating to paying and collecting agents) shall have effect.
(1) After section 129A of the Taxes Act 1988 (interest on cash collateral paid in connection with stock lending arrangements) there shall be inserted the following section—
(1) The income which, as income deriving from investments of a description specified in any of the relevant provisions, is eligible for relief from tax by virtue of that provision shall be taken to include any relevant stock lending fee.
(2) For the purposes of this section the relevant provisions are sections 592(2), 608(2)(a), 613(4), 614(3), 620(6) and 643(2).
(3) In this section “relevant stock lending fee”, in relation to investments of any description, means any amount, in the nature of a fee, which is payable in connection with an approved stock lending arrangement relating to investments which, but for any transfer under the arrangement, would be investments of that description.
(4) In this section “approved stock lending arrangement” has the same meaning as in Schedule 5A.”
(2) This section has effect in relation to any arrangements entered into on or after 2nd January 1996.
(1) In section 710(5) of the Taxes Act 1988 (meaning of “transfer” in sections 711 to 728), after “or otherwise” there shall be inserted “, but—
(a) does not include the vesting of securities in a person’s personal representatives on his death; and”.
(2) Subsection (1) of section 721 of that Act (transfer of securities on death) shall cease to have effect.
(3) For subsection (2) of that section (transfers by personal representatives to legatees) there shall be substituted—
“(2) Where—
(a) an individual who is entitled to securities dies, and
(b) in the interest period in which the individual died, the securities are transferred by his personal representatives to a legatee,
section 713 shall not apply to the transfer.”
(4) Subsection (4) of that section (interest period treated as ending with death) shall cease to have effect.
(5) This section has effect as respects deaths on or after 6th April 1996.
(1) Sections 729, 737A(2)(b) and 786(4) of the Taxes Act 1988 (provisions applying to sale and repurchase agreements) shall cease to have effect except in relation to cases where the initial agreement to sell or transfer the securities or other property was made before the appointed day.
(2) In section 737 of that Act—
(a) in subsection (5) (manufactured dividends paid to UK residents by non-residents), for the words from “a person resident in the United Kingdom” to “the United Kingdom recipient shall” there shall be substituted “a United Kingdom recipient, that recipient shall”; and
(b) after that subsection there shall be inserted the following subsection—
“(5AAA) For the purposes of subsection (5) above a person who receives a manufactured dividend is a United Kingdom recipient if—
(a) he is resident in the United Kingdom; or
(b) he is not so resident but receives that dividend for the purposes of a trade carried on through a branch or agency in the United Kingdom.”
(3) In section 737C of that Act (deemed manufactured payments), the following subsection shall be inserted after subsection (11A) in relation to cases where the initial agreement to sell the securities is made on or after the appointed day, that is to say—
“(11B) The preceding provisions of this section shall have effect in cases where paragraph 2, 3 or 4 of Schedule 23A would apply by virtue of section 737A(5) but for paragraph 5 of that Schedule as they have effect in a case where the paragraph in question is not disapplied by paragraph 5; and where—
(a) the gross amount of the deemed manufactured interest, or
(b) the gross amount of the deemed manufactured overseas dividend,
falls to be calculated in such a case under subsection (8) or (11) above, it shall be so calculated by reference to the provisions of paragraph 3 or 4 of Schedule 23A that would have applied but for paragraph 5 of that Schedule.”
(4) In sub-paragraph (3) of paragraph 4 of Schedule 23A to that Act (manufactured overseas dividends paid to UK residents by non-residents), for the words from “a person resident in the United Kingdom” to “the United Kingdom recipient shall” there shall be substituted “a United Kingdom recipient, that recipient shall”.
(5) After that sub-paragraph there shall be inserted the following sub-paragraphs—
“(3A) For the purposes of sub-paragraph (3) above a person who receives a manufactured overseas dividend is a United Kingdom recipient if—
(a) he is resident in the United Kingdom; or
(b) he is not so resident but receives that dividend for the purposes of a trade carried on through a branch or agency in the United Kingdom.
(3B) Dividend manufacturing regulations may make provision, in relation to cases falling within sub-paragraph (3) above, for the amount of tax required under that sub-paragraph to be taken to be reduced, to such extent and for such purposes as may be determined under the regulations, by reference to amounts of overseas tax charged on, or in respect of—
(a) the making of the manufactured overseas dividend; or
(b) the overseas dividend of which the manufactured overseas dividend is representative.”
(6) In sub-paragraph (7) of paragraph 4 of that Schedule (regulations for off-setting), for the words from “against” to “and account” in the words after paragraph (b) there shall be substituted “in accordance with the regulations and to the prescribed extent, amounts falling within paragraph (a) of sub-paragraph (7AA) below against the sums falling within paragraph (b) of that sub-paragraph, and to account”; and after that sub-paragraph there shall be inserted the following sub-paragraph—
“(7AA) Those amounts and sums are—
(a) amounts of overseas tax in respect of overseas dividends received by him in that chargeable period, amounts of overseas tax charged on, or in respect of, the making of manufactured overseas dividends so received by him and amounts deducted under sub-paragraph (2) above from any such manufactured overseas dividends; and
(b) the sums due from him on account of the amounts deducted by him under sub-paragraph (2) above from the manufactured overseas dividends paid by him in that chargeable period.”
(7) In sub-paragraph (1) of paragraph 8 of that Schedule (power to modify provisions of Schedule)—
(a) before the “or” at the end of paragraph (a) there shall be inserted—
“(aa) such persons who receive, or become entitled to receive, manufactured dividends, manufactured interest or manufactured overseas dividends as may be prescribed,”
Finance Act 1996