Finance Act 1994 (c. 9)

(The document as of February, 2008)

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" (2A) Where the net proceeds to the relevant person of the sale fall to be increased or determined under subsection (2) above, those proceeds as so increased or determined shall be taken to be reduced by the amount of any capital value realised before the sale " .

(5) In section 6 (buildings, etc. in enterprise zones), in subsection (4), after "4(1)" there is inserted "4A(1)".

(6) In section 8 (writing off expenditure)--

(a) after subsection (12A) there is inserted--

" (12B) Where any event occurs to which section 4(1)(dd) applies, there shall be treated as written off as at the time of the event an amount equal to the capital value realised " , and

(b) in subsection (13), for "(12A)" there is substituted "(12B)".

(7) Subject to subsection (8) below, this section applies--

(a) where capital expenditure has been incurred under a relevant contract, or

(b) where capital expenditure is deemed for the purposes of sections 1 to 8 to have been incurred by a person who under a relevant contract acquires the relevant interest;

and "relevant contract" means a contract entered into on or after 13th January 1994 or a conditional contract entered into before that date which becomes unconditional after 25th February 1994.

(8) This section applies to capital expenditure on the construction of a building or structure only if the expenditure, or, in the case of expenditure falling within subsection (7)(b) above, the actual expenditure on the construction of the building or structure to which the expenditure so falling relates, is incurred, or is incurred under a contract entered into, at a time when the site of the building or structure is wholly or mainly in an enterprise zone, being a time not more than 10 years after the site was first included in the zone.

121 Used buildings etc. in enterprise zones

(1) Where--

(a) the relevant interest in a building or structure is sold on a date falling after the expiry of the period of two years beginning with the date on which the building or structure was first used, and

(b) that period ends, and the date on which the relevant interest is sold falls, within the period beginning with 13th January 1994 and ending with 31st August 1994,

paragraphs (c) and (d) of section 10B(1) of the [1990 c. 1.] Capital Allowances Act 1990 (purchaser of building etc. in enterprise zone within two years of first use eligible for allowances) shall have effect as if the period there referred to were the period beginning with the date on which the building or structure was first used and ending with 31st August 1994.

(2) Expressions used in this section and in Part I of the Capital Allowances Act 1990 have the same meaning as in that Part.

Securities

122 Sale and repurchase of securities: deemed manufactured payments

After section 737 of the Taxes Act 1988 there shall be inserted the following sections--

" 737A Sale and repurchase of securities: deemed manufactured payments

(1) This section applies where on or after the appointed day a person (the transferor) agrees to sell any securities, and under the same or any related agreement the transferor or another person connected with him--

(a) is required to buy back the securities, or

(b) acquires an option, which he subsequently exercises, to buy back the securities;

but this section does not apply unless the conditions set out in subsection (2) below are fulfilled.

(2) The conditions are that--

(a) as a result of the transaction, a dividend which becomes payable in respect of the securities is receivable otherwise than by the transferor,

(b) the dividend is not, by virtue of any other provision of the Tax Acts, treated as income of the transferor,

(c) there is no requirement under any agreement mentioned in subsection (1) above for a person to pay to the transferor on or before the relevant date an amount representative of the dividend, and

(d) it is reasonable to assume that, in arriving at the repurchase price of the securities, account was taken of the fact that the dividend is receivable otherwise than by the transferor.

(3) For the purposes of subsection (2) above the relevant date is the date when the repurchase price of the securities becomes due.

(4) Where it is a person connected with the transferor who is required to buy back the securities, or who acquires the option to buy them back, references in the following provisions of this section to the transferor shall be construed as references to the connected person.

(5) Where this section applies, section 737 and Schedule 23A and dividend manufacturing regulations shall apply as if--

(a) the relevant person were required, under the arrangements for the transfer of the securities, to pay to the transferor an amount representative of the dividend mentioned in subsection (2)(a) above,

(b) a payment were made by that person to the transferor in discharge of that requirement, and

(6) In subsection (5) above "the relevant person" means--

(a) where subsection (1)(a) above applies, the person from whom the transferor is required to buy back the securities;

(b) where subsection (1)(b) above applies, the person from whom the transferor has the right to buy back the securities;

and in that subsection "dividend manufacturing regulations" means regulations under Schedule 23A (whenever made).

737B Interpretation of section 737A

(1) In section 737A and this section "securities" means United Kingdom equities, United Kingdom securities or overseas securities; and--

(a) where the securities mentioned in section 737A(1) are United Kingdom securities, references in section 737A to a dividend shall be construed as references to a periodical payment of interest;

(b) where the securities mentioned in section 737A(1) are overseas securities, references in section 737A to a dividend shall be construed as references to an overseas dividend.

(2) In this section "United Kingdom equities", "United Kingdom securities", "overseas securities" and "overseas dividend" have the meanings given by paragraph 1(1) of Schedule 23A.

(3) For the purposes of section 737A agreements are related if each is entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).

(4) In section 737A "the repurchase price of the securities" means--

(a) where subsection (1)(a) of that section applies, the amount which, under any agreement mentioned in section 737A(1), the transferor or connected person is required to pay for the securities bought back, or

(b) where subsection (1)(b) of that section applies, the amount which under any such agreement the transferor or connected person is required, if he exercises the option, to pay for the securities bought back.

(5) In section 737A and subsection (4) above references to buying back securities include references to buying similar securities.

(6) For the purposes of subsection (5) above securities are similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred; and "interest" here includes dividends.

(7) For the purposes of section 737A and subsection (4) above--

(a) a person who is connected with the transferor and is required to buy securities sold by the transferor shall be treated as being required to buy the securities back notwithstanding that it was not he who sold them, and

(b) a person who is connected with the transferor and acquires an option to buy securities sold by the transferor shall be treated as acquiring an option to buy the securities back notwithstanding that it was not he who sold them.

(8) Section 839 shall apply for the purposes of section 737A and this section.

(9) In section 737A "the appointed day" means such day as the Treasury may by order appoint, and different days may be appointed in relation to--

(a) United Kingdom equities,

(b) United Kingdom securities, and

737C Deemed manufactured payments: further provisions

(1) This section applies where section 737A applies.

(2) Subsection (3) below applies where--

(a) the dividend mentioned in section 737A(2)(a) is a dividend on United Kingdom equities, and

(b) by virtue of section 737A(5), section 737 and paragraph 2 of Schedule 23A apply, or paragraph 2 of Schedule 23A applies, in relation to the payment which is treated under section 737A(5) as having been made;

and in subsection (3) below "the deemed manufactured dividend" means that payment.

(3) Where this subsection applies--

(a) the amount of the deemed manufactured dividend shall be taken to be an amount equal to the amount of the dividend mentioned in section 737A(2)(a);

(b) the repurchase price of the securities shall be treated, for the purposes of the Tax Acts other than section 737A and of the 1992 Act, as increased by an amount equal to the gross amount of the deemed manufactured dividend.

(4) In subsection (3) above the reference to the gross amount of the deemed manufactured dividend is to the aggregate of--

(a) the amount of the deemed manufactured dividend, and

(b) the amount of the tax credit that would have been issued in respect of the deemed manufactured dividend had the deemed manufactured dividend in fact been a dividend on the United Kingdom equities.

(5) Subsection (6) below applies where--

(a) the dividend mentioned in section 737A(2)(a) is a periodical payment of interest on United Kingdom securities, and

(b) by virtue of section 737A(5), section 737 applies in relation to the payment which is treated under section 737A(5) as having been made;

and in subsection (6) below "the deemed manufactured interest" means the payment referred to in paragraph (b) above.

(6) Where this subsection applies, the amount of the deemed manufactured interest shall be taken to be an amount equal to the gross amount of the periodical payment referred to in subsection (5)(a) above reduced by an amount equal to income tax thereon at the basic rate for the year of assessment in which that periodical payment is made.

(7) Subsection (8) below applies where--

(a) the dividend mentioned in section 737A(2)(a) is a periodical payment of interest on United Kingdom securities, and

(b) by virtue of section 737A(5), paragraph 3 of Schedule 23A applies in relation to the payment which is treated under section 737A(5) as having been made (whether or not section 737 also applies in relation to that payment);

and in subsection (8) below "the deemed manufactured interest" means the payment referred to in paragraph (b) above.

(8) Where this subsection applies--

(a) the gross amount of the deemed manufactured interesthall be taken to be the amount found under paragraph 3(4) of Schedule 23A;

(b) any deduction which, by v 3 of Schedule 23A, is required to be made out of the gross amount of the deemed manufactured interest shall be deemed to have been made.

(9) Where subsections (6) and (8) above apply, or where subsection (8) above applies, the repurchase price of the securities shall be treated, for the purposes of the Tax Acts other than section 737A and of the 1992 Act, as increased by the gross amount of the deemed manufactured interest.

(10) Subsection (11) below applies where--

(a) the dividend mentioned in section 737A(2)(a) is an overseas dividend, and

(b) by virtue of section 737A(5), paragraph 4 of Schedule 23A applies in relation to the payment which is treated under section 737A(5) as having been made;

and in subsection (11) below "the deemed manufactured overseas dividend" means that payment.

(11) Where this subsection applies--

(a) the gross amount of the deemed manufactured overseas dividend shall be taken to be the amount found under paragraph 4(5)(b) and (c) of Schedule 23A;

(b) any deduction which, by virtue of paragraph 4 of Schedule 23A, is required to be made out of the gross amount of the deemed manufactured overseas dividend shall be deemed to have been made;

(c) the repurchase price of the securities shall be treated, for the purposes of the Tax Acts other than section 737A and of the 1992 Act, as increased by the gross amount of the deemed manufactured overseas dividend.

(12) In this section--

(a) "United Kingdom equities", "United Kingdom securities" and "overseas dividend" have the meanings given by paragraph 1(1) of Schedule 23A;

(b) "the repurchase price of the securities" shall be construed in accordance with section 737B(4). "

123 Manufactured payments

(1) In section 715 of the Taxes Act 1988 (exceptions from provisions about deemed sums and reliefs under the accrued income scheme) in subsection (6) (exceptions in certain cases where section 737 has effect) after "section 737" there shall be inserted "or paragraph 3 or 4 of Schedule 23A".

(2) In Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) paragraph 5 (dividends and interest passing through the market) shall be amended as mentioned in subsections (3) to (5) below.

(3) In sub-paragraph (2) (dividend which manufactured payment represents not to be treated as income of the payment manufacturer) the word "and" at the end of paragraph (b) shall be omitted and at the end of paragraph (c) there shall be inserted " and

(d) relief shall not be given under any provision of the Tax Acts to the payment manufacturer in respect of the manufactured payment. "

(4) In sub-paragraph (4) (dividend which subsequent manufactured payment represents not to be treated as income of the subsequent manufacturer) the word "and" at the end of paragraph (b) shall be omitted and at the end of paragraph (c) there shall be inserted " and

(d) relief shall not be given under any provision of the Tax Acts to the payment manufacturer or any subsequent manufacturer in respect of the manufactured payment or any subsequent manufactured payment. "

(5) After sub-paragraph (6) there shall be inserted--

" (7) In this paragraph "relief" means relief by way of--

(a) deduction in computing profits or gains; or

(b) deduction or set off against income or total profits. "

(6) Subsection (1) above shall apply where any of the contracts mentioned in section 715(6) of the Taxes Act 1988 is made on or after 30th November 1993.

(7) Subsections (2) to (5) above shall apply in relation to payments made on or after 30th November 1993.

124 Overseas dividend manufacturers: limitation of double taxation relief

The following sub-paragraph shall be inserted after sub-paragraph (7) of paragraph 4 of Schedule 23A to the Taxes Act 1988--

" (7A) Dividend manufacturing regulations may provide that where a person who is an overseas dividend manufacturer is entitled to relief under Part XVIII (or would be apart from provision made under this sub-paragraph) and the circumstances are such as may be prescribed--

(a) his entitlement shall be extinguished, or

(b) if the regulations so provide, the amount of the relief shall be reduced to such extent as may be found in accordance with prescribed rules. "

PAYE

125 Payment by intermediary

After section 203A of the Taxes Act 1988 there shall be inserted--

" 203B PAYE: payment by intermediary

(1) Subject to subsection (2) below, where any payment of, or on account of, assessable income of an employee is made by an intermediary of the employer, the employer shall be treated, for the purposes of PAYE regulations, as making a payment of that income of an amount equal to the amount determined in accordance with subsection (3) below.

(2) Subsection (1) above does not apply if the intermediary (whether or not he is a person to whom section 203 and PAYE regulations apply) deducts income tax from the payment he makes and accounts for it in accordance with PAYE regulations.

(3) The amount referred to is--

(a) if the amount of the payment made by the intermediary is an amount to which the recipient is entitled after deduction of any income tax, the aggregate of the amount of that payment and the amount of any income tax due; and

(b) in any other case, the amount of the payment made by the intermediary.

(4) For the purposes of this section, a payment of, or on account of, assessable income of an employee is made by an intermediary of the employer if it is made--

(a) by a person acting on behalf of the employer and at the expense of the employer or a person connected with him; or

(b) by trustees holding property for any persons who include or class of persons which includes the employee.

(5) Section 839 applies for the purposes of subsection (4) above. "

126 Employees working for persons other than their employers, etc

(1) After section 203B of the Taxes Act 1988 (which is inserted by section 125 above) there shall be inserted--

" 203C PAYE: employee of non-UK employer

(1) This subsection applies where--

(a) an employee during any period works for a person ("the relevant person") who is not his employer;

(b) any payment of, or on account of, assessable income of the employee in respect of work done in that period is made by a person who is the employer or an intermediary of the employer;

(c) PAYE regulations do not apply to the person making the payment or, if he makes the payment as an intermediary of the employer, the employer; and

(d) income tax is not deducted or accounted for in accordance with the regulations by the person making the payment or, if he makes the payment as an intermediary of the employer, the employer.

(2) Where subsection (1) above applies, the relevant person shall be treated, for the purposes of PAYE regulations, as making a payment of the assessable income of the employee of an amount equal to the amount determined in accordance with subsection (3) below.

(3) The amount referred to is--

(a) if the amount of the payment actually made is an amount to which the recipient is entitled after deduction of any income tax, the aggregate of the amount of that payment and the amount of any income tax due; and

(b) in any other case, the amount of the payment actually made.

(4) In this section and sections 203D and 203E "work", in relation to an employee, means the performance of any duties of the office or employment of the employee and any reference to his working shall be construed accordingly.

(5) Subsections (4) and (5) of section 203B apply for the purposes of this section as they apply for the purposes of that section.

203D PAYE: employee non-resident, etc

(1) This section applies in relation to an employee in a year of assessment only if--

(a) he is not resident or, if resident, not ordinarily resident in the United Kingdom; and

(b) he works or will work in the United Kingdom and also works or is likely to work outside the United Kingdom.

(2) Where in relation to any year of assessment it appears to an officer of the Board that--

(a) some of the income of an employee to whom this section applies is assessable to income tax under Case II of Schedule E, but

(b) an as yet unascertainable proportion of the income may prove not to be assessable,

the officer may, on an application made by the appropriate person, give a direction for determining a proportion of any payment made in that year of, or on account of, income of the employee which shall be treated for the purposes of PAYE regulations as a payment of assessable income of the employee.

(3) In this section "the appropriate person" means--

(a) the person designated by the employer for the purposes of this section; or

(b) if no person is so designated, the employer.

(4) An application for a direction under subsection (2) above shall provide such information as is available and is relevant to the giving of the direction.

(5) A direction under subsection (2) above--

(a) shall specify the employee to whom and the year of assessment to which it relates;

(b) shall be given by notice to the appropriate person; and

(6) The date so specified may not be earlier than thirty days from the date on which the notice of the withdrawal is given.

(7) Where--

(a) a direction under subsection (2) above has effect in relation to an employee to whom this section applies, and

(b) a payment of, or on account of, the income of the employee is made in the year of assessment to which the direction relates,

the proportion of the payment determined in accordance with the direction shall be treated for the purposes of PAYE regulations as a payment of assessable income of the employee.

(8) Where in any year of assessment--

(a) no direction under subsection (2) above has effect in relation to an employee to whom this section applies, and

(b) any payment is made of, or on account of, the income of the employee,

the entire payment shall be treated for the purposes of PAYE regulations as a payment of assessable income of the employee.

(9) Subsections (7) and (8) above are without prejudice to--

(a) any assessment in respect of the income of the employee in question; and

(b) any right to repayment of income tax overpaid and any obligation to pay income tax underpaid.

203E PAYE: mobile UK workforce

(1) This subsection applies where it appears to the Board that--

(a) a person ("the relevant person") has entered into or is likely to enter into an agreement that employees of another person ("the contractor") shall in any period work for, but not as employees of, the relevant person;

(b) payments of, or on account of, assessable income of the employees in respect of work done in that period are likely to be made by or on behalf of the contractor; and

(c) PAYE regulations would apply on the making of such payments but it is likely that income tax will not be deducted or accounted for in accordance with the regulations.

(2) Where subsection (1) above applies, the Board may give a direction that, if--

(a) any employees of the contractor work in any period for, but not as employees of, the relevant person, and

(b) any payment is made by the relevant person in respect of work done by the employees in that period,

income tax shall be deducted in accordance with the provisions of this section by the relevant person on making that payment.

(3) A direction under subsection (2) above--

(a) shall specify the relevant person and the contractor to whom it relates;

(b) shall be given by notice to the relevant person; and

(4) The Board shall take such steps as are reasonably practicable to ensure that the contractor is supplied with a copy of any notice given under subsection (3) above which relates to him.

(5) Where--

(a) a direction under subsection (2) above has effect, and

(b) any employees of the contractor specified in the direction work for, but not as employees of, the relevant person so specified,

income tax shall, subject to and in accordance with PAYE regulations, be deducted by the relevant person on making any payment in respect of that work as if so much of the payment as is attributable to work done by each employee were a payment of assessable income of that employee. "

127 Tradeable assets

After section 203E of the Taxes Act 1988 (which is inserted by section 126 above) there shall be inserted--

" 203F PAYE: tradeable assets

(1) Where any assessable income of an employee is provided in the form of a tradeable asset, the employer shall be treated, for the purposes of PAYE regulations, as making a payment of that income of an amount equal to the amount specified in subsection (3) below.

(2) For the purposes of subsection (1) above "tradeable asset" means--

(a) any asset capable of being sold or otherwise realised on a recognised investment exchange (within the meaning of the [1986 c. 60.] Financial Services Act 1986) or the London Bullion Market;

(b) any asset capable of being sold or otherwise realised on any market for the time being specified in PAYE regulations; and

(3) The amount referred to is--

(a) in the case of an asset falling within subsection (2)(a) or (b) above, the amount for which it is capable of being sold or the amount for which it can be realised on the exchange or market in question; and

(b) in the case of an asset for which trading arrangements exist at the time when the asset is provided, the amount which is obtained under those arrangements.

(4) For the purposes of subsection (2) above, "asset" does not include--

(a) any payment actually made of, or on account of, assessable income;

(b) any non-cash voucher, credit-token or cash voucher (as defined in sections 141 to 143); or

(5) Subject to subsection (4) above, for the purposes of subsection (2) above "asset" includes any property and in particular any right or interest falling within any paragraph in Part I of Schedule 1 to the [1986 c. 60.] Financial Services Act 1986. "

128 Non-cash vouchers

After section 203F of the Taxes Act 1988 (which is inserted by section 127 above) there shall be inserted--

" 203G PAYE: non-cash vouchers

(1) Where a non-cash voucher to which this section applies is received by an employee, the employer shall be treated, for the purposes of PAYE regulations, as making a payment of assessable income of the employee of an amount equal to the amount ascertained in accordance with section 141(1)(a).

(2) This section applies to a non-cash voucher to which section 141(1) applies if--

(a) either of the two conditions set out below is fulfilled with respect to the voucher; and

(b) the voucher is not of a description for the time being excluded from the scope of this section by PAYE regulations.

(3) The first condition is fulfilled with respect to a voucher if it is capable of being exchanged for goods--

(a) which, at the time when the voucher is provided, are capable of being sold or otherwise realised on an exchange or market falling within section 203F(2)(a) or (b); or

(b) for which, at the time when the voucher is provided, trading arrangements exist.

(4) The second condition is fulfilled with respect to a voucher if, at the time when the voucher is provided, the voucher itself--

(a) is capable of being sold or otherwise realised on an exchange or market falling within section 203F(2)(a) or (b); or

(b) is a voucher for which trading arrangements exist. "

129 Credit-tokens

After section 203G of the Taxes Act 1988 (which is inserted by section 128 above) there shall be inserted--

" 203H PAYE: credit-tokens

(1) Subject to subsection (3) below, on each occasion on which an employee uses a credit-token provided to him by reason of his employment to obtain--

(a) money, or

(b) goods falling within subsection (2) below,

the employer shall be treated, for the purposes of PAYE regulations, as making a payment of assessable income of the employee of an amount equal to the amount ascertained in accordance with section 142(1)(a).

(2) Goods fall within this subsection if, at the time when they are obtained, they are goods--

(a) which are capable of being sold or otherwise realised on an exchange or market falling within section 203F(2)(a) or (b); or

(b) for which trading arrangements exist.

(3) PAYE regulations may make provision for excluding from the scope of this section any description of use of a credit-token.

(4) In this section "credit-token" has the same meaning as in section 142. "

130 Cash vouchers

After section 203H of the Taxes Act 1988 (which is inserted by section 129 above) there shall be inserted--

" 203I PAYE: cash vouchers

(1) Subject to subsection (2) below, where a cash voucher to which section 143(1) applies is received by an employee, the employer shall be treated, for the purposes of PAYE regulations, as making a payment of assessable income of the employee of an amount equal to the amount ascertained in accordance with section 143(1)(a).

(2) PAYE regulations may make provision for excluding from the scope of this section the provision of cash vouchers in such description of circumstances as may be specified in the regulations. "

131 Supplementary

After section 203I of the Taxes Act 1988 (which is inserted by section 130 above) there shall be inserted--

" 203J S.203B to s.203I: accounting for tax

(1) Where an employer makes a notional payment of assessable income of an employee, the obligation to deduct income tax shall have effect as an obligation on the employer to deduct income tax at such time as may be prescribed by PAYE regulations from any payment or payments he actually makes of, or on account of, such income of that employee.

(2) For the purposes of this section--

(a) a notional payment is a payment treated as made by virtue of any of sections 203B, 203C and 203F to 203I, other than a payment whose amount is determined in accordance with section 203B(3)(a) or 203C(3)(a); and

(b) any reference to an employer includes a reference to a person who is treated as making a payment by virtue of section 203C(2).

(3) Where, by reason of an insufficiency of payments actually made, the employer is unable to deduct the amount (or the full amount) of the income tax as required by virtue of subsection (1) above, the obligation to deduct income tax shall have effect as an obligation on the employer to account to the Board at such time as may be prescribed by PAYE regulations for an amount of income tax equal to the amount of income tax he is required, but is unable, to deduct.

(4) PAYE regulations may make provision--

(a) with respect to the time when any notional payment (or description of notional payment) is made;

(b) applying (with or without modifications) any specified provisions of the regulations for the time being in force in relation to deductions from actual payments to amounts accounted for in respect of any notional payments;

(5) Any amount which an employer deducts or for which he accounts as mentioned in subsections (1) and (3) above shall be treated as an amount paid by the employee in question in respect of his liability to income tax for such year of assessment as may be specified in PAYE regulations.

203K Trading arrangements

(1) "Trading arrangements" in sections 203F to 203H shall be construed in accordance with this section.

(2) Trading arrangements--

(a) for an asset, are arrangements for the purpose of enabling the person to whom the asset is provided to obtain an amount similar to the expense incurred in the provision of the asset;

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