Finance Act 1994 (c. 9)

(The document as of February, 2008)

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(a) the taxpayer has made and delivered a return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period, and

(b) the situation mentioned in subsection (1) above is attributable to an error or mistake in the return as to the basis on which his liability ought to have been computed,

the taxpayer shall not be assessed under that subsection in respect of the chargeable period there mentioned if the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when it was made.

(3) Where the taxpayer has made and delivered a return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period, he shall not be assessed under subsection (1) above--

(a) in respect of the chargeable period mentioned in that subsection; and

(b) in the case of a return under section 8 or 8A, in the same capacity as that in which he made and delivered the return,

unless one of the two conditions mentioned below is fulfilled.

(4) The first condition is that the situation mentioned in subsection (1) above is attributable to fraudulent or negligent conduct on the part of the taxpayer or a person acting on his behalf.

(5) The second condition is that at the time when an officer of the Board--

(a) ceased to be entitled to give notice of his intention to enquire into the taxpayer's return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period; or

(b) informed the taxpayer that he had completed his enquiries into that return,

the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above.

(6) For the purposes of subsection (5) above, information is made available to an officer of the Board if--

(a) it is contained in the taxpayer's return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period (the return), or in any accounts, statements or documents accompanying the return;

(b) it is contained in any claim made as regards the relevant chargeable period by the taxpayer acting in the same capacity as that in which he made the return, or in any accounts, statements or documents accompanying any such claim;

(c) it is contained in any documents, accounts or particulars which, for the purposes of any enquiries into the return or any such claim by an officer of the Board, are produced or furnished by the taxpayer to the officer, whether in pursuance of a notice under section 19A of this Act or otherwise; or

(d) it is information the existence of which, and the relevance of which as regards the situation mentioned in subsection (1) above--

(i) could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; or

(ii) are notified in writing by the taxpayer to an officer of the Board.

(7) In subsection (6) above--

(a) any reference to the taxpayer's return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period includes--

(i) a reference to any return of his under that section for either of the two immediately preceding chargeable periods; and

(ii) where the return is under section 8 and the taxpayer carries on a trade, profession or business in partnership, a reference to any return with respect to the partnership under section 12AA of this Act for the relevant chargeable period or either of those periods; and

(b) any reference in paragraphs (b) to (d) to the taxpayer includes a reference to a person acting on his behalf.

(8) An objection to the making of an assessment under this section on the ground that neither of the two conditions mentioned above is fulfilled shall not be made otherwise than on an appeal against the assessment.

(9) Any reference in this section to the relevant chargeable period is a reference to--

(a) in the case of the situation mentioned in paragraph (a) or (b) of subsection (1) above, the chargeable period mentioned in that subsection; and

(b) in the case of the situation mentioned in paragraph (c) of that subsection, the chargeable period in respect of which the claim was made.

(10) In this section "profits"--

(a) in relation to income tax, means income,

(b) in relation to capital gains tax, means chargeable gains, and

(2) This section, so far as it relates to partnerships whose trades, professions or businesses are set up and commenced before 6th April 1994, has effect as respects the year 1997-98 and subsequent years of assessment.

Payment of tax

192 Payments on account of income tax

After Part V of the Management Act there shall be inserted the following section--

" Part VA Payment of Tax

59A Payments on account of income tax

(1) This section applies to any person (the taxpayer) as regards a year of assessment if as regards the immediately preceding year--

(a) he has been assessed to income tax under section 9 of this Act in any amount, and

(b) that amount (the assessed amount) exceeds the amount of any income tax which has been deducted at source, and

(c) the amount of the excess (the relevant amount) is not less than such amount as may be prescribed by regulations made by the Board, and

(d) the proportion which the relevant amount bears to the assessed amount is not less than such proportion as may be so prescribed.

(2) Subject to subsection (3) below, the taxpayer shall make two payments on account of his liability to income tax for the year of assessment--

(a) the first on or before the 31st January in that year, and

(b) the second on or before the next following 31st July;

and, subject to subsection (4) below, each of those payments on account shall be of an amount equal to 50 per cent. of the relevant amount.

(3) If, at any time before the 31st January next following the year of assessment, the taxpayer makes a claim under this subsection stating--

(a) his belief that he will not be assessed to income tax for that year, or that the amount in which he will be so assessed will not exceed the amount of income tax deducted at source, and

(b) his grounds for that belief,

each of the payments on account shall not be, and shall be deemed never to have been, required to be made.

(4) If, at any time before the 31st January next following the year of assessment, the taxpayer makes a claim under this subsection stating--

(a) his belief that the amount in which he will be assessed to income tax for that year will exceed the amount of income tax deducted at source by a stated amount which is less than the relevant amount, and

(b) his grounds for that belief,

the amount of each of the payments on account required to be made shall be, and shall be deemed always to have been, equal to 50 per cent. of the stated amount.

(5) Where the taxpayer makes a claim under subsection (3) or (4) above, there shall be made all such adjustments, whether by the repayment of amounts paid on account or otherwise, as may be required to give effect to the provisions of that subsection.

(6) Where the taxpayer fraudulently or negligently makes any incorrect statement in connection with a claim under subsection (3) or (4) above, he shall be liable to a penalty not exceeding the difference between--

(a) the amount which would have been payable on account if he had made a correct statement, and

(b) the amount of the payment on account (if any) made by him.

(7) The provisions of the Income Tax Acts as to the recovery of income tax shall apply to an amount falling to be paid on account of tax in the same manner as they apply to an amount of tax.

(8) In this section any reference to income tax deducted at source is a reference to--

(a) income tax deducted or treated as deducted from any income or treated as paid on any income, or

(b) any amount which, in respect of the year of assessment, is to be deducted at source under section 203 of the principal Act in a subsequent year, or is a tax credit to which section 231 of that Act applies. "

193 Payment of income tax and capital gains tax

After section 59A of the Management Act there shall be inserted the following section--

" 59B Payment of income tax and capital gains tax

(1) Subject to subsection (2) below, the difference between--

(a) the amount of income tax and capital gains tax contained in a person's self-assessment under section 9 of this Act for any year of assessment, and

(b) the aggregate of any payments on account made by him in respect of that year (whether under section 59A of this Act or otherwise) and any income tax which in respect of that year has been deducted at source,

shall be payable by him or (as the case may be) repayable to him as mentioned in subsection (3) or (4) below.

(2) The following, namely--

(a) any amount which, in the year of assessment, is deducted at source under section 203 of the principal Act in respect of a previous year, and

(b) any amount which, in respect of the year of assessment, is to be deducted at source under that section in a subsequent year, or is a tax credit to which section 231 of that Act applies,

shall be respectively deducted from and added to the aggregate mentioned in subsection (1)(b) above.

(3) In a case where the person--

(a) gave the notice required by section 7 of this Act within six months from the end of the year of assessment, but

(b) was not given notice under section 8 or 8A of this Act until after the 31st October next following that year,

the difference shall be payable or repayable at the end of the period of three months beginning with the day on which the notice under section 8 or 8A was given.

(4) In any other case, the difference shall be payable or repayable on or before the 31st January next following the year of assessment.

(5) Where a person's self-assessment under section 9 of this Act is amended under section 9(4), section 28A(2), (3) or (4) or section 30B(2) of this Act, any amount of tax which is payable or repayable by virtue of the amendment shall, subject to section 55(6) and (9) of this Act, be payable or (as the case may be) repayable--

(a) in a case where notice of the amendment is given after, or less than 30 days before, the day given by subsection (3) or (4) above, on or before the day following the end of the period of 30 days beginning with the day on which notice is given; and

(b) in any other case, on or before the day given by subsection (3) or (4) above.

(6) Any amount of income tax or capital gains tax which is payable by virtue of an assessment made under section 29 of this Act shall be payable on the day following the end of the period of 30 days beginning with the day on which the notice of assessment is given.

(7) In this section any reference to income tax deducted at source is a reference to income tax deducted or treated as deducted from any income or treated as paid on any income. "

194 Surcharges on unpaid income tax and capital gains tax

After section 59B of the Management Act there shall be inserted the following section--

" 59C Surcharges on unpaid income tax and capital gains tax

(1) This section applies in relation to any income tax or capital gains tax which has become payable by a person (the taxpayer) in accordance with section 55 or 59B of this Act.

(2) Where any of the tax remains unpaid on the day following the expiry of 28 days from the due date, the taxpayer shall be liable to a surcharge equal to 5 per cent. of the unpaid tax.

(3) Where any of the tax remains unpaid on the day following the expiry of 6 months from the due date, the taxpayer shall be liable to a further surcharge equal to 5 per cent. of the unpaid tax.

(4) Where the taxpayer has incurred a penalty under section 7, 93(5) or 95 of this Act, no part of the tax by reference to which that penalty was determined shall be regarded as unpaid for the purposes of subsection (2) or (3) above.

(5) An officer of the Board may impose a surcharge under subsection (2) or (3) above; and notice of the imposition of such a surcharge--

(a) shall be served on the taxpayer, and

(b) shall state the day on which it is issued and the time within which an appeal against the imposition of the surcharge may be brought.

(6) A surcharge imposed under subsection (2) or (3) above shall carry interest at the rate applicable under section 178 of the [1989 c. 26.] Finance Act 1989 from the end of the period of 30 days beginning with the day on which the surcharge is imposed until payment.

(7) An appeal may be brought against the imposition of a surcharge under subsection (2) or (3) above within the period of 30 days beginning with the date on which the surcharge is imposed.

(8) Subject to subsection (9) below, the provisions of this Act relating to appeals shall have effect in relation to an appeal under subsection (7) above as they have effect in relation to an appeal against an assessment to tax.

(9) On an appeal under subsection (7) above section 50(6) to (8) of this Act shall not apply but the Commissioners may--

(a) if it appears to them that, throughout the period of default, the taxpayer had a reasonable excuse for not paying the tax, set aside the imposition of the surcharge; or

(b) if it does not so appear to them, confirm the imposition of the surcharge.

(10) Inability to pay the tax shall not be regarded as a reasonable excuse for the purposes of subsection (9) above.

(11) The Board may in their discretion--

(a) mitigate any surcharge under subsection (2) or (3) above, or

(b) stay or compound any proceedings for the recovery of any such surcharge,

and may also, after judgment, further mitigate or entirely remit the surcharge.

(12) In this section--

"the due date", in relation to any tax, means the date on which the tax becomes due and payable;
"the period of default", in relation to any tax which remained unpaid after the due date, means the period beginning with that date and ending with the day before that on which the tax was paid. "

195 Payment of corporation tax

After section 59C of the Management Act there shall be inserted the following section--

" 59D Payment of corporation tax

(1) Corporation tax for an accounting period shall be due and payable on the day following the expiry of nine months from the end of that period.

(2) If, with respect to any accounting period--

(a) a company has paid an amount of corporation tax; and

(b) at any time before an assessment to corporation tax for the period becomes final, the company has grounds for believing that, by reason of a change in the circumstances of the case since the tax was paid, the amount paid exceeds the company's probable liability for corporation tax,

the company may, by notice given to an officer of the Board on or after the date which, under section 826 of the principal Act, is the material date in relation to that tax, make a claim for the repayment to the company of the amount of that excess.

(3) A notice under subsection (2) above shall state the amount which the company considers should be repaid and the grounds referred to in paragraph (b) of that subsection.

(4) If, apart from this subsection, a claim would fall to be made under subsection (2) above at a time when--

(a) the company has appealed against, or against an amendment of, such an assessment as is referred to in paragraph (b) of that subsection, but

(b) that appeal has not been finally determined,

that subsection shall have effect as if, for the words from "make a claim" to "excess", there were substituted the words "apply to the Commissioners to whom the appeal stands referred for a determination of the amount which should be repaid to the company pending a determination of the company"s liability for the accounting period in question'.

(5) An application under subsections (2) and (4) above shall be determined in the same way as an appeal.

(6) Where on an appeal against, or against an amendment of, an assessment to corporation tax a company makes an application under section 55(3) or (4) of this Act, that application may be combined with an application under subsections (2) and (4) above (relating to tax which was paid prior to the assessment). "

Miscellaneous and supplemental

196 Management: other amendments

Schedule 19 to this Act (which makes other amendments relating to the management of tax) shall have effect.

197 Construction of certain references

(1) In the Tax Acts and the Gains Tax Acts, any reference (however expressed) to a person being assessed to tax, or being charged to tax by an assessment, shall be construed as including a reference to his being so assessed, or being so charged--

(a) by a self-assessment under section 9 or 11AA of the Management Act, or

(b) by a determination under section 28C of that Act (which, until superseded by such a self-assessment, has effect as if it were one).

(2) In this section "the Gains Tax Acts" means the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 and all other enactments relating to capital gains tax.

198 Transitional provisions

(1) Section 59A of the Management Act shall have effect as regards the year 1996-97 as if--

(a) the reference in subsection (1)(a) to a person being assessed to income tax under section 9 of that Act were a reference to his being assessed to income tax under section 29 of that Act;

(b) the reference in subsection (1)(b) to the assessed amount were a reference to the difference between that amount and the amount of any income tax charged at a rate other than the basic rate on any income--

(i) from which tax has been deducted otherwise than under section 203 of the Taxes Act 1988,

(ii) from or on which income tax is treated as having been deducted or paid, or

(iii) which is chargeable under Schedule F;

(i) the first payment on account to be of an amount equal to the aggregate of the relevant proportion of the relevant amount and 50 per cent. of the difference between the relevant amount and that proportion of that amount, and

(ii) the second payment on account to be of an amount equal to 50 per cent. of that difference; and

(d) subsection (4) provided that, in the circumstances there mentioned--

(i) the amount of the first payment on account required to be made should be, and should be deemed always to have been, equal to the aggregate of the relevant proportion of the stated amount and 50 per cent. of the difference between the stated amount and that proportion of that amount, and

(ii) the amount of second payment on account required to be made should be, and should be deemed always to have been, equal to 50 per cent. of that difference.

(2) In subsection (1) above "relevant proportion" means the proportion which the amount of tax charged under Schedule A or any of Cases III to VI of Schedule D for the year 1995-96 bears to the assessed amount.

(3) In the case of a partnership whose trade, profession or business is set up and commenced before 6th April 1994, section 59B of the Management Act shall have effect, as respects each partner and the year 1996-97, as if his share of any income tax to which the partnership is assessed for that year were income tax which in respect of that year had been deducted at source.

199 Interpretation and commencement of Chapter III

(1) In this Chapter "the Management Act" means the [1970 c. 9.] Taxes Management Act 1970.

(2) Unless the contrary intention appears, this Chapter--

(a) so far as it relates to income tax and capital gains tax, has effect as respects the year 1996-97 and subsequent years of assessment, and

(b) so far as it relates to corporation tax, has effect as respects accounting periods ending on or after the appointed day.

(3) For the purposes of this Chapter the appointed day is such day, not earlier than 1st April 1996, as the Treasury may by order appoint.

Chapter IV Changes for Facilitating Self-Assessment

Assessment under Cases I and II of Schedule D

200 Assessment on current year basis

For section 60 of the Taxes Act 1988 there shall be substituted the following section--

" 60 Assessment on current year basis

(1) Subject to subsection (2) below and section 63A, income tax shall be charged under Cases I and II of Schedule D on the full amount of the profits or gains of the year of assessment.

(2) Where, in the case of a trade, profession or vocation, a basis period for the year of assessment is given by subsection (3) below or sections 61 to 63, the profits or gains of that period shall be taken to be the profits or gains of the year.

(3) Subject to sections 61 to 63, the basis period for a year of assessment is as follows--

(a) if the year is the first year of assessment in which there is an accounting date which falls not less than 12 months after the commencement date, the period of 12 months ending with that accounting date; and

(b) if there is a basis period for the immediately preceding year and that basis period is not given by section 61, the period of 12 months beginning immediately after the end of that basis period.

(4) In the case of a person who, if he had not died, would under the provisions of this section and sections 61 to 63A have become chargeable to income tax for any year, the tax which would have been so chargeable--

(a) shall be assessed and charged on his personal representatives, and

(b) shall be a debt due from and payable out of his estate.

(5) In this section and sections 61 to 63--

"accounting date", in relation to a year of assessment, means a date in the year to which accounts are made up or, where there are two or more such dates, the latest of those dates;
"the commencement date" and "the commencement year" mean respectively the date on which and the year of assessment in which the trade, profession or vocation is set up and commenced. "

201 Basis of assessment at commencement

For section 61 of the Taxes Act 1988 there shall be substituted the following section--

" 61 Basis of assessment at commencement

(1) Notwithstanding anything in section 60, where the year of assessment is the commencement year, the computation of the profits or gains chargeable to income tax under Case I or II of Schedule D shall be made on the profits or gains arising in the year.

(2) Subject to section 63, where the year of assessment is the year next following the commencement year and--

(a) there is an accounting date in the year and the period beginning with the commencement date and ending with the accounting date is a period of less than 12 months; or

(b) the basis period for the year would, apart from this subsection, be given by section 62(2) and the period beginning with the commencement date and ending with the new date in the year is a period of less than 12 months,

the basis period for the year is the period of 12 months beginning with the commencement date.

(3) In this section "the new date" has the same meaning as in section 62. "

202 Change of basis period

For section 62 of the Taxes Act 1988 there shall be substituted the following section--

" 62 Change of basis period

(1) Subsection (2) below applies where, in the case of a trade, profession or vocation--

(a) an accounting change, that is, a change from one accounting date ("the old date") to another ("the new date"), is made or treated as made in a year of assessment; and

(b) either section 62A applies or the year of assessment is the year next following or next but one following the commencement year.

(2) The basis period for the year of assessment is as follows--

(a) if the year is the year next following the commencement year or the relevant period is a period of less than 12 months, the period of 12 months ending with the new date in the year; and

(b) if the relevant period is a period of more than 12 months, that period;

and in this subsection "the relevant period" means the period beginning immediately after the end of the basis period for the preceding year and ending with the new date in the year.

(3) Where subsection (2) above does not apply as respects an accounting change made or treated as made in a year of assessment ("the first year"), this section and section 62A shall have effect in relation to the next following year ("the second year") as if the change had not been made or treated as made.

(4) As a consequence of subsection (3) above--

(a) an accounting change shall be treated as made in the second year if the date or, as the case may be, the latest date in that year to which accounts are made up is a date other than the date of the end of the basis period for the first year; and

(b) no such change shall be treated as made in the second year if that date is the date of the end of that period.

(5) For the purposes of this section an accounting change is made in the first year of assessment in which accounts are not made up to the old date, or accounts are made up to the new date, or both. "

203 Conditions for such a change

After section 62 of the Taxes Act 1988 there shall be inserted the following section--

" 62A Conditions for such a change

(1) This section applies in relation to an accounting change if the following are fulfilled, namely--

(a) the first and second conditions mentioned below, and

(b) either the third or the fourth condition so mentioned.

(2) The first condition is that the first accounting period ending with the new date does not exceed 18 months.

(3) The second condition is that notice of the accounting change is given to an officer of the Board on or before the 31st January next following the year of assessment.

(4) The third condition is that no accounting change as respects which section 62(2) has applied has been made or treated as made in any of the five years immediately preceding the year of assessment.

(5) The fourth condition is that--

(a) the notice required by the second condition sets out the reasons for which the change is made; and

(b) either the officer is satisfied that the change is made for bona fide commercial reasons or he does not, within 60 days of receiving the notice, give notice to the person carrying on the trade, profession or vocation that he is not so satisfied.

(6) An appeal may be brought against the giving of a notice under subsection (5)(b) above within the period of 30 days beginning with the date on which the notice is given.

(7) Subject to subsection (8) below, the provisions of the Management Act relating to appeals shall have effect in relation to an appeal under subsection (6) above as they have effect in relation to an appeal against an assessment to tax.

(8) On an appeal under subsection (6) above section 50(6) to (8) of the Management Act shall not apply but the Commissioners may--

(a) if they are satisfied that the change is made for bona fide commercial reasons, set the notice under subsection (5)(b) above aside; or

(b) if they are not so satisfied, confirm that notice.

(9) Obtaining a tax advantage shall not be regarded as a bona fide commercial reason for the purposes of subsections (5) and (8) above.

(10) In this section--

(a) "accounting period" means a period for which accounts are made up, and

(b) expressions which are also used in section 62 have the same meanings as in that section. "

204 Basis of assessment on discontinuance

For section 63 of the Taxes Act 1988 there shall be substituted the following section--

" 63 Basis of assessment on discontinuance

Where a trade, profession or vocation is permanently discontinued in a year of assessment other than the commencement year, the basis period for the year shall be the period beginning--

(a) where the year is the year next following the commencement year, immediately after the end of the commencement year, and

(b) in any other case, immediately after the end of the basis period for the preceding year of assessment,

and (in either case) ending with the date on which the trade, profession or vocation is permanently discontinued. "

205 Overlap profits and overlap losses

After section 63 of the Taxes Act 1988 there shall be inserted the following section--

" 63A Overlap profits and overlap losses

(1) Where, in the case of any trade, profession or vocation, the basis period for a year of assessment is given by section 62(2)(b), a deduction shall be made in computing the profits or gains of that year of an amount equal to that given by the formula in subsection (2) below.

(2) The formula referred to in subsection (1) above is--

---

where--

A = the aggregate of any overlap profits less the aggregate of any amounts previously deducted under subsection (1) above;
B = the number of days in the basis period;
C = the number of days in the year of assessment;
D = the aggregate of the overlap periods of any overlap profits less the aggregate number of days given by the variable "B-- C" in any previous applications of this subsection.

(3) Where, in the case of any trade, profession or vocation, the basis period for a year of assessment is given by section 63, a deduction shall be made in computing the profits or gains of that year of an amount equal to--

(a) the aggregate of any overlap profits, less

(b) the aggregate of any amounts deducted under subsection (1) above.

(4) Where, in the case of any trade, profession or vocation, an amount of a loss would, apart from this subsection, fall to be included in the computations for two successive years of assessment, that amount shall not be included in the computation for the second of those years.

(5) In this section--

"overlap profit" means an amount of profits or gains which, by virtue of sections 60 to 62, is included in the computations for two successive years of assessment; and
"overlap period", in relation to an overlap profit, means the number of days in the period in which the overlap profit arose. "

Assessment under Cases III to VI of Schedule D

206 Basis of assessment under Case III

For section 64 of the Taxes Act 1988 there shall be substituted the following section--

" 64 Case III assessments

Income tax under Case III of Schedule D shall be computed on the full amount of the income arising within the year of assessment, and shall be paid on the actual amount of that income, without any deduction. "

207 Basis of assessment under Cases IV and V

(1) In subsection (1) of section 65 of that Act (Case IV and V assessments: general), the words "and sections 66 and 67" and the words "the year preceding" shall cease to have effect.

(2) In subsection (3) of that section--

(a) after the words "Cases I and II of Schedule D" there shall be inserted the words "(including sections 60 to 63A and 113)"; and

(b) the words from "Nothing in this subsection" to the end shall cease to have effect.

(3) In subsection (5) of that section, the words "subject to sections 66 and 67" and the words "the year preceding", in each place where they occur, shall cease to have effect.

(4) Sections 66 and 67 of that Act (special rules for fresh income and special rules where source of income disposed of or yield ceases) shall cease to have effect.

(5) In subsection (1) of section 68 of that Act (special rules where property etc. situated in Republic of Ireland), for the words "sections 65 or 66" there shall be substituted the words "section 65".

(6) In its application to trades, professions or vocations set up and commenced before 6th April 1994, subsection (2) above has effect as respects the year 1997-98 and subsequent years of assessment.

208 Basis of assessment under Case VI

For section 69 of the Taxes Act 1988 there shall be substituted the following section--

" 69 Case VI assessments

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