Office of Public Sector Information
PART IV continued CHAPTER VI continued
(1A) Life or endowment business does not include the issue, in respect of a contract made before 1st September 1996, of a policy affording provision for sickness or other infirmity (whether bodily or mental), unless—
(a) the policy also affords assurance for a gross sum independent of sickness or other infirmity;
(b) not less than 60 per cent. of the amount of the premiums is attributable to the provision afforded during sickness or other infirmity; and
(c) there is no bonus or addition which may be declared or accrue upon the assurance of the gross sum.
(1B) Life or endowment business does not include the assurance of any annuity the consideration for which consists of sums obtainable on the maturity, or on the surrender, of any other policy of assurance issued by the friendly society, being a policy of assurance forming part of the tax exempt life or endowment business of the friendly society.”
(2) In subsection (2) of that section (other definitions) there shall be inserted at the appropriate places—
“(a) “insurance company” shall be construed in accordance with section 431;”; and
“(b) “long term business” shall be construed in accordance with section 431;”.
(3) In section 266 of that Act (life assurance premium relief) in subsection (6) (deduction from total income where relief given for part of certain payments to friendly societies) after paragraph (b) there shall be inserted “and
(c) the insurance or contract is not excluded by subsection (6A) below,”.
(4) After that subsection there shall be inserted—
“(6A) For the purposes of subsection (6)(c) above, an insurance or contract is excluded by this subsection if it is made on or after 1st September 1996 and affords provision for sickness or other infirmity (whether bodily or mental), unless—
(a) it also affords assurance for a gross sum independent of sickness or other infirmity;
(b) not less than 60 per cent. of the amount of the premiums is attributable to the provision afforded during sickness or other infirmity; and
(c) there is no bonus or addition which may be declared or accrue upon the assurance of the gross sum.”
(5) In section 463(1) of that Act (Corporation Tax Acts to apply to friendly societies' life or endowment business as they apply to insurance companies' mutual life assurance business) after “mutual life assurance business” there shall be inserted “(or other long term business)”.
(6) The amendment made by subsection (5) above shall have effect in relation to accounting periods ending on or after 1st September 1996.
(1) In section 633(1) of the Taxes Act 1988 (Board not to approve a personal pension scheme which makes provision for any benefit other than those specified in paragraphs (a) to (e)) in paragraph (e) (payment on or after the death of a member of a lump sum satisfying the conditions in section 637A) for the words following “a lump sum” there shall be substituted “with respect to which the conditions in section 637A (return of contributions) are satisfied”.
(2) For section 637A of that Act (return of contributions on or after death of member) there shall be substituted—
(1) The lump sum payable under the arrangements in question (or, where two or more lump sums are so payable, those lump sums taken together) must represent no more than the return of contributions together with reasonable interest on contributions or bonuses out of profits, after allowing for—
(a) any income withdrawals, and
(b) any purchases of annuities such as are mentioned in section 636.
To the extent that contributions are invested in units under a unit trust scheme, the lump sum (or lump sums) may represent the sale or redemption price of the units.
(2) A lump sum must be payable only if, in the case of the arrangements in question,—
(a) no such annuity as is mentioned in section 634 has been purchased by the member;
(b) no such annuity as is mentioned in section 636 has been purchased in respect of the relevant interest; and
(c) no election in accordance with subsection (5)(a) of section 636 has been made in respect of the relevant interest.
(3) Where the member’s death occurs after the date which is his pension date in relation to the arrangements in question, a lump sum must not be payable more than two years after the death unless, in the case of that lump sum, the person entitled to such an annuity as is mentioned in section 636 in respect of the relevant interest—
(a) has elected in accordance with section 636A to defer the purchase of an annuity; and
(b) has died during the period of deferral.
(4) In this section “the relevant interest” means the interest, under the arrangements in question, of the person to whom or at whose direction the payment in question is made, except where there are two or more such interests, in which case it means that one of them in respect of which the payment is made.
(5) Where, under the arrangements in question, there is a succession of interests, any reference in subsection (2) or (3) above to the relevant interest includes a reference to any interest (other than that of the member) in relation to which the relevant interest is a successive interest.”
(3) This section—
(a) has effect in relation to approvals, of schemes or amendments, given under Chapter IV of Part XIV of the Taxes Act 1988 (personal pension schemes) after the passing of this Act; and
(b) does not affect any approval previously given.
(1) Section 419 of the Taxes Act 1988 (loans to participators etc.) shall be amended in accordance with subsections (2) to (4) below.
(2) For subsection (3) (time when tax becomes due) there shall be substituted the following subsection—
“(3) Tax due by virtue of this section in relation to any loan or advance shall be due and payable on the day following the expiry of nine months from the end of the accounting period in which the loan or advance was made.”
(3) After subsection (4) (relief in respect of repayment) there shall be inserted the following subsection—
“(4A) Where the repayment of the whole or any part of a loan or advance occurs on or after the day on which tax by virtue of this section becomes due in relation to that loan or advance, relief in respect of the repayment shall not be given under subsection (4) above at any time before the expiry of nine months from the end of the accounting period in which the repayment occurred.”
(4) In subsection (6) (application to loans and advances to certain companies who are participators etc.), the words “and to a company not resident in the United Kingdom” shall be omitted.
(5) In section 826(4) of that Act (interest on repayment of tax by virtue of section 419), for paragraph (a) there shall be substituted the following paragraph—
“(a) the date when the entitlement to relief in respect of the repayment accrued, that is to say—
(i) where the repayment of the loan or advance (or part thereof) occurred on or after the day mentioned in section 419(4A), the date nine months after the end of that accounting period; and
(ii) in any other case, the date nine months after the end of the accounting period in which the loan or advance was made;
or”.
(6) This section has effect in relation to any loan or advance made in an accounting period ending on or after 31st March 1996.
(1) Section 13 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (attribution of gains to members of non-resident companies) shall be amended in accordance with subsections (2) to (9) below.
(2) In subsection (2) (persons subject to charge on gain to company), for “holds shares” there shall be substituted “is a participator”.
(3) For subsections (3) and (4) (part of gain attributed to person subject to charge) there shall be substituted the following subsections—
“(3) That part shall be equal to the proportion of the gain that corresponds to the extent of the participator’s interest as a participator in the company.
(4) Subsection (2) above shall not apply in the case of any participator in the company to which the gain accrues where the aggregate amount falling under that subsection to be apportioned to him and to persons connected with him does not exceed one twentieth of the gain.”
(4) In subsection (5), paragraph (a) (section not to apply where gain distributed within two years) shall be omitted; and after that subsection there shall be inserted the following subsection—
“(5A) Where—
(a) any amount of capital gains tax is paid by a person in pursuance of subsection (2) above, and
(b) an amount in respect of the chargeable gain is distributed (either by way of dividend or distribution of capital or on the dissolution of the company) within 2 years from the time when the chargeable gain accrued to the company,
that amount of tax (so far as neither reimbursed by the company nor applied as a deduction under subsection (7) below) shall be applied for reducing or extinguishing any liability of that person to income tax in respect of the distribution or (in the case of a distribution falling to be treated as a disposal on which a chargeable gain accrues to that person) to any capital gains tax in respect of the distribution.”
(5) In subsection (7) (deduction of tax paid in computing gain on shares in the company)—
(a) for “not reimbursed by the company)” there shall be inserted “neither reimbursed by the company nor applied under subsection (5A) above for reducing any liability to tax)”; and
(b) for “the shares by reference to which the tax was paid” there shall be substituted “any asset representing his interest as a participator in the company.”
(6) After subsection (7) there shall be inserted the following subsection—
“(7A) In ascertaining for the purposes of subsection (5A) or (7) above the amount of capital gains tax or income tax chargeable on any person for any year on or in respect of any chargeable gain or distribution—
(a) any such distribution as is mentioned in subsection (5A)(b) above and falls to be treated as income of that person for that year shall be regarded as forming the highest part of the income on which he is chargeable to tax for the year;
(b) any gain accruing in that year on the disposal by that person of any asset representing his interest as a participator in the company shall be regarded as forming the highest part of the gains on which he is chargeable to tax for that year;
(c) where any such distribution as is mentioned in subsection (5A)(b) above falls to be treated as a disposal on which a gain accrues on which that person is so chargeable, that gain shall be regarded as forming the next highest part of the gains on which he is so chargeable, after any gains falling within paragraph (b) above; and
(d) any gain treated as accruing to that person in that year by virtue of subsection (2) above shall be regarded as the next highest part of the gains on which he is so chargeable, after any gains falling within paragraph (c) above.”
(7) In subsection (9) (cases where person charged is a company)—
(a) for “the person owning any of the shares in the company” there shall be substituted “a person who is a participator in the company”; and
(b) for the words from “to the shares” onwards there shall be substituted “to the participating company’s interest as a participator in the company to which the gain accrues shall be further apportioned among the participators in the participating company according to the extent of their respective interests as participators, and subsection (2) above shall apply to them accordingly in relation to the amounts further apportioned, and so on through any number of companies.”
(8) In subsection (10) (application to trustees), for “owning shares in the company” there shall be substituted “who are participators in the company, or in any company amongst the participators in which the gain is apportioned under subsection (9) above,”.
(9) After subsection (11) there shall be inserted the following subsections—
“(12) In this section “participator”, in relation to a company, has the meaning given by section 417(1) of the Taxes Act for the purposes of Part XI of that Act (close companies).
(13) In this section—
(a) references to a person’s interest as a participator in a company are references to the interest in the company which is represented by all the factors by reference to which he falls to be treated as such a participator; and
(b) references to the extent of such an interest are references to the proportion of the interests as participators of all the participators in the company (including any who are not resident or ordinarily resident in the United Kingdom) which on a just and reasonable apportionment is represented by that interest.
(14) For the purposes of this section, where—
(a) the interest of any person in a company is wholly or partly represented by an interest which he has under any settlement (“his beneficial interest”), and
(b) his beneficial interest is the factor, or one of the factors, by reference to which that person would be treated (apart from this subsection) as having an interest as a participator in that company,
the interest as a participator in that company which would be that person’s shall be deemed, to the extent that it is represented by his beneficial interest, to be an interest of the trustees of the settlement (and not of that person), and references in this section, in relation to a company, to a participator shall be construed accordingly.
(15) Any appeal under section 31 of the Management Act involving any question as to the extent for the purposes of this section of a person’s interest as a participator in a company shall be to the Special Commissioners.”
(10) In paragraph 1(3) of Schedule 5 to the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (application of section 86 to section 13 gains)—
(a) in paragraph (a), for “hold shares in a company which originate” there shall be substituted “are participators in a company in respect of property which originates”;
(b) in paragraph (b), for “the shares” there shall be substituted “so much of their interest as participators as arises from that property”; and
(c) at the end there shall be added—
“Subsections (12) and (13) of section 13 shall apply for the purposes of this sub-paragraph as they apply for the purposes of that section.”
(11) This section applies to gains accruing on or after 28th November 1995.
(1) In section 704 of the Taxes Act 1988 (which relates to the cancellation of tax advantages and specifies the circumstances mentioned in section 703(1)) in paragraph D(2)(b) (companies which do not satisfy the conditions there specified with respect to their shares or stocks) for “are authorised to be dealt in on the Stock Exchange, and are so dealt in (regularly or from time to time)” there shall be substituted “are listed in the Official List of the Stock Exchange, and are dealt in on the Stock Exchange regularly or from time to time”.
(2) The reference in paragraph D(2)(b) of section 704 of the Taxes Act 1988 to being listed in the Official List of the Stock Exchange and being dealt in on the Stock Exchange regularly or from time to time shall be taken to include a reference to being dealt in on the Unlisted Securities Market regularly or from time to time, but this subsection is subject to subsection (3) below.
(3) Subsection (2) above—
(a) so far as relating to sub-paragraph (2) of paragraph D of section 704 of the Taxes Act 1988 as it applies for the purposes of sub-paragraph (1) of that paragraph or paragraph E of that section, shall not have effect where the relevant transaction takes place after the date on which the Unlisted Securities Market closes;
(b) so far as relating to paragraph D of that section as it applies for the purposes of section 210(3) or 211(2) of that Act (which relate to bonus issues following, and other matters to be treated or not treated as, repayment of share capital) shall not have effect—
(i) in the case of section 210(3), in relation to share capital issued after that date; or
(ii) in the case of section 211(2), in relation to distributions made after that date.
(4) Except as provided by subsection (3) above, this section—
(a) so far as relating to sub-paragraph (2) of paragraph D of section 704 of the Taxes Act 1988 as it applies for the purposes of sub-paragraph (1) of that paragraph or paragraph E of that section, shall have effect where the relevant transaction takes place after the passing of this Act; and
(b) so far as relating to paragraph D of that section as it applies for the purposes of section 210(3) or 211(2) of that Act, shall have effect—
(i) in the case of section 210(3), in relation to share capital issued after the passing of this Act; or
(ii) in the case of section 211(2), in relation to distributions made after the passing of this Act.
(5) In this section “the relevant transaction” means—
(a) the transaction in securities mentioned in paragraph (b) of section 703(1) of the Taxes Act 1988, or
(b) the first of the two or more such transactions mentioned in that paragraph,
as the case may be.
(1) In each of sections 163 and 164 of, and paragraph 5 of Schedule 6 to, the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (retirement relief), for “the age of 55”, wherever occurring, there shall be substituted “the age of 50”.
(2) The amendments made by this section shall apply in relation to disposals on or after 28th November 1995.
Section 164A of the Taxation of Chargeable Gains Act 1992 (re-investment relief) shall have effect, and be deemed always to have had effect, as if the following subsections were inserted after subsection (2)—
“(2A) Where the chargeable gain referred to in subsection (1)(a) above is one which (apart from this section) would be deemed to accrue by virtue of section 116(10)(b)—
(a) any reduction falling to be made by virtue of subsection (2)(a) above shall be treated as one made in the consideration mentioned in section 116(10)(a), instead of in the consideration for the disposal of the asset disposed of; but
(b) if the disposal on which that gain is deemed to accrue is a disposal of only part of the new asset, it shall be assumed, for the purpose only of making a reduction affecting the amount of that gain—
(i) that the disposal is a disposal of the whole of a new asset,
(ii) that the gain accruing on that disposal relates to an old asset consisting in the corresponding part of what was in fact the old asset, and
(iii) that the corresponding part of the consideration deemed to be given for what was in fact the old asset is taken to be the consideration by reference to which the amount of that gain is computed;
and in this subsection “new asset” and “old asset” have the same meanings as in section 116.
(2B) Where a chargeable gain accrues in accordance with subsection (12) of section 116, this Chapter shall have effect—
(a) as if that gain were a gain accruing on the disposal of an asset; and
(b) in relation to that deemed disposal, as if references in this Chapter to the consideration for the disposal were references to the sum of money falling, apart from this Chapter, to be used in computing the gain accruing under that subsection.”
(1) In section 566 of the Taxes Act 1988 (powers to make regulations in connection with the provisions relating to sub-contractors in the construction industry), after subsection (2) there shall be inserted the following subsection—
“(2A) The Board may by regulations make provision—
(a) for the issue of documents (to be known as “registration cards”) to persons who are parties, as sub-contractors, to any contract relating to construction operations or who are likely to become such parties;
(b) for a registration card to contain all such information about the person to whom it is issued as may be required, for the purposes of any regulations under this section, by a person making payments under any such contract;
(c) for a registration card to take such form and to be valid for such period as may be prescribed by the regulations;
(d) for the renewal, replacement or cancellation of a registration card;
(e) for requiring the surrender of a registration card in such circumstances as may be specified in the regulations;
(f) for requiring the production of a registration card to such persons and in such circumstances as may be so specified;
(g) for requiring any person who—
(i) makes or is proposing to make payments to which section 559 applies, and
(ii) is a person to whom a registration card has to be produced under the regulations,
to take steps that ensure that it is produced to him and that he has an opportunity of inspecting it for the purpose of checking that it is a valid registration card issued to the person required to produce it.
(2B) A person who fails to comply with an obligation imposed on him by virtue of subsection (2A)(g) above shall be liable to a penalty not exceeding £3,000.
(2C) Subject to subsection (2D) below, where—
(a) a person who is a party to a contract relating to any construction operations (“the contractor”) makes or is proposing to make payments to which section 559 applies,
(b) the contractor is required by regulations under this section to make statements about another party to the contract (“the sub-contractor”) in any return, certificate or other document,
(c) a registration card containing the information to be stated should have been produced, in accordance with any such regulations, to the contractor, and
(d) the statements made in the return, certificate or other document, so far as relating to matters the information about which should have been obtainable from the card, are inaccurate or incomplete in any material respect,
the contractor shall be liable to a penalty not exceeding £3,000.
(2D) A person shall not be liable to a penalty under subsection (2C) above if—
(a) a valid registration card issued to the sub-contractor, or a document which the contractor had reasonable grounds for believing to be such a card, was produced to the contractor and inspected by him before the statements in question were made; and
(b) the contractor took all such steps as were reasonable, in addition to the inspection of that card, for ensuring that the statements were accurate and complete.
(2E) A person liable to a penalty under subsection (2C) above shall not, by reason only of the matters in respect of which he is liable to a penalty under that subsection, be liable to any further penalty under section 98 of the Management Act.
(2F) Regulations under this section may make different provision for different cases.”
(2) In the second column of the Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties in respect of certain information provisions), for the entry relating to regulations under section 566(1) and (2) of the Taxes Act 1988 there shall be substituted the following entry—
“regulations under section 566(1), (2) or (2A);”.
Schedule 35 to this Act (which amends sections 33A to 33F of the [1990 c. 1.] Capital Allowances Act 1990) shall have effect.
(1) The Capital Allowances Act 1990 shall have effect, and be deemed always to have had effect, with the following sections inserted after section 138 (assets ceasing to belong to traders)—
(1) For the purposes of section 138 where—
(a) a person (“the transferor”) disposes of any interest in an oil licence to another (“the transferee”), and
(b) part of the value of that interest is attributable to any allowable exploration expenditure incurred by the transferor,
that disposal shall be deemed (subject to section 138B) to be a disposal by which an asset representing the allowable exploration expenditure to which that part of the value is attributable ceases to belong to the transferor.
(2) Section 138 shall have effect in relation to the disposal of an interest in an oil licence, to the extent that the disposal is treated by virtue of subsection (1) above as a disposal of an asset representing allowable exploration expenditure, as if the disposal value of the asset were an amount equal to such part of the transferee’s expenditure on acquiring the interest as it is just and reasonable to attribute to the part of the value of that interest that is attributable to the allowable exploration expenditure.
(3) In this section and section 138B references to allowable exploration expenditure are references to any allowable scientific research expenditure of a capital nature incurred on mineral exploration and access.
(4) In this section and section 138B—
“foreign oil concession” means any right to search for or win overseas petroleum, being a right conferred or exercisable (whether or not by virtue of a licence) in relation to a particular area;
“interest” in relation to an oil licence, includes, where there is an agreement which—
relates to oil from the whole or any part of the area to which the licence applies, and
was made before the extraction of the oil to which it relates,
any entitlement under that agreement to, or to a share of, either that oil or the proceeds of its sale;
“mineral exploration and access” has the same meaning as in Part IV;
“oil”—
except in relation to a UK licence, means any petroleum; and
in relation to such a licence, has the same meaning as in Part I of the [1975 c. 22.] Oil Taxation Act 1975;
“oil licence” means any UK licence or foreign oil concession;
“overseas petroleum” means any petroleum that exists in its natural condition at a place to which neither the [1934 c. 36.] Petroleum (Production) Act 1934 nor the [1964 c. 28 (N.I.).] Petroleum (Production) Act (Northern Ireland) 1964 applies;
“petroleum” has the [1934 c. 36.] same meaning as in the Petroleum (Production) Act 1934; and
“UK licence” means a licence within the meaning of Part I of the Oil Taxation Act 1975.
(1) Subsections (2) and (3) below apply where—
(a) a person (“the transferor”) disposes of any interest in an oil licence to another (“the transferee”) during the transitional period;
(b) part of the value of the interest is attributable to allowable exploration expenditure incurred by the transferor; and
(c) an election is made in accordance with this section specifying an amount as the amount to be treated as so attributable.
(2) Section 138 shall have effect in relation to the disposal as if—
(a) the disposal were a disposal by which an asset representing the allowable exploration expenditure ceases to belong to the transferor; and
(b) the disposal value of that asset were an amount equal to the amount specified in the election.
(3) For the purposes of Part IV, the amount of any expenditure incurred—
(a) by the transferee in acquiring the interest from the transferor, or
(b) by any person subsequently acquiring the interest (or an interest deriving from the interest),
which is taken to be attributable to expenditure incurred, before the disposal to the transferee, on mineral exploration and access shall be the lesser of the amount specified in the election and the amount which, apart from this subsection, would be taken to be so attributable.
(4) An election—
(a) shall be made by notice to the Board given by the transferor; and
(b) subject to subsection (5) below, shall not have effect unless a copy of it is served on the transferee and the transferee consents to it.
(5) If the Special Commissioners are satisfied—
(a) that the disposal was made under or in pursuance of an agreement entered into by the transferor and the transferee on the mutual understanding that a quantified (or quantifiable) part of the value of the interest disposed of was attributable to allowable exploration expenditure, and
(b) that the part quantified in accordance with that understanding and the amount specified in the election are the same,
they may dispense with the need for the transferee to consent to the election.
(6) Any question falling to be determined by the Special Commissioners under subsection (5) above shall be determined by them in like manner as if it were an appeal; but both the transferor and the transferee shall be entitled to appear and be heard by those Commissioners or to make representations to them in writing.
(7) Subject to subsection (8) below, an election may specify any amount, including a nil amount, as the amount to be treated as mentioned in subsection (1)(c) above.
(8) Where—
(a) a return has been made for a chargeable period of the transferor, and
(b) the return includes, at the time when it is made, an amount which, disregarding the provisions of this section, would be treated under section 138 as a trading receipt accruing in that period,
the election must not specify an amount less than the amount included in the return unless the Board agrees the lesser amount in question.
(9) An election made in accordance with this section—
(a) is irrevocable; and
(b) shall not be varied after it is made.
Finance Act 1996