Finance Act 1994 (c. 9)

(The document as of February, 2008)

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(a) in paragraph (a), for "to a deduction from her total income of" there shall be substituted "to an income tax reduction calculated by reference to"; and

(b) in paragraph (b), for "to a deduction of" there shall be substituted "to an income tax reduction calculated by reference to".

(6) The Taxes Act 1988 and the [1970 c. 9.] Taxes Management Act 1970 shall have effect with the amendments specified in Schedule 8 to this Act (which supplements the provisions of this section).

(7) This section and Schedule 8 to this Act shall have effect for the year 1994-95 and, subject to the following provisions of this section, for subsequent years of assessment.

(8) For the year 1995-96 and subsequent years of assessment section 256(2)(a) of the Taxes Act 1988 shall have effect with the substitution of "15 per cent" for the words "20 per cent."

(9) For the year 1995-96, section 257A of the Taxes Act 1988 shall have effect--

(a) as if the same amount (namely £1,720) were specified in subsection (1) as is specified in that subsection as it applies for the year 1994-95;

(b) as if the amount specified in subsection (2) were "£2,995"; and

(10) Section 257C(1) of the Taxes Act 1988 (indexation), so far as relating to section 257A (1) to (3) of that Act, shall not apply for the year 1994-95 or for the year 1995-96 but shall not be prevented by anything in this section from applying for the year 1996-97 or any subsequent year of assessment.

78 Amount by reference to which MCA is reduced

Section 257A(5) of the Taxes Act 1988 (reduction of married couple's allowance if claimant's total income exceeds a certain amount) shall apply for the year 1994-95 as if the amount specified in it were the same as the amount specified in it as it applies for the year 1993-94, and accordingly section 257C(1) of that Act (indexation) so far as relating to section 257A(5) shall not apply for the year 1994-95.

79 Relief for maintenance payments

(1) Sections 347A and 347B of the [1988 c. 39.] Taxes Act 1988 and section 38 of the Finance Act 1988 (which contain provision with respect to the deductions from income allowed on account of maintenance payments) shall have effect in relation to payments becoming due on or after 6th April 1994 with the following modifications.

(2) Section 347A (which restricts the making of deductions) shall apply to any payment made--

(a) in pursuance of any obligation which falls within paragraphs (a) to (c) of subsection (4) of section 36 of the Finance Act 1988 (existing obligations) and is an obligation under an order made by a court, a written or oral agreement or a deed executed for giving effect to an agreement, 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 on or before the day on which the payment became due but after 5th April 1994,

as if that obligation were not an existing obligation within the definition contained in that subsection.

(3) In subsection (2) of section 347B (relief for qualifying maintenance payments)--

(a) the words "Notwithstanding section 347A(1)(a) but" shall be omitted; and

(b) for the words from "in computing" to "to deduct" there shall be substituted "for a year of assessment to an income tax reduction calculated by reference to".

(4) In subsection (3) of section 347B (restriction of relief to amount of married couple's allowance), for the words from the beginning to "exceed" there shall be substituted "The amount by reference to which any income tax reduction is to be calculated under this section shall be limited to".

(5) In subsection (5) of section 347B (other payments attracting relief), for "otherwise than under this section" there shall be substituted "by virtue of section 36(3) of the [1988 c. 39.] Finance Act 1988 but otherwise than in accordance with section 38(2)(a) of that Act".

(6) After subsection (5) of section 347B there shall be inserted the following subsections--

" (5A) Where any person is entitled under this section for any year of assessment to an income tax reduction calculated by reference to the amount determined in accordance with subsections (2) to (5) above ("the relevant amount"), the amount of that person's liability for that year to income tax on his total income shall be the amount to which he would have been liable apart from this section less whichever is the smaller of--

(a) the amount equal to the appropriate percentage of the relevant amount; and

(b) the amount which reduces his liability to nil;

and in this subsection "the appropriate percentage" means 20 per cent. for the year 1994-95 and 15 per cent. for the year 1995-96 and subsequent years of assessment.

(5B) In determining for the purposes of subsection (5A) above the amount of income tax to which a person would be liable apart from any income tax reduction under this section, no account shall be taken of--

(a) any income tax reduction under Chapter I of Part VII;

(b) any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 or by way of a credit under section 790(1); or

(c) any tax at the basic rate on so much of that person's income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment. "

(7) In subsection (3) of section 38 (amount of relief in transitional cases for persons making payments), for the words from the word "aggregate", in the first place where it occurs, to "exceed" there shall be substituted "amount (if any) by which the relevant aggregate exceeds the amount specified in section 257A(1) of the Taxes Act 1988 for the year; and in this subsection and subsection (3A) below "the relevant aggregate" means whichever is the smaller of the following, that is to say, the aggregate amount of the payments made by him which fall due in that year and to which this section applies and".

(8) After subsection (3) of section 38 there shall be inserted the following subsection--

" (3A) Sections 347A and 347B of the Taxes Act 1988 (except, in the case of section 347A, so far as it restricts the extent to which any payment is to be treated as forming part of the income of the person to whom it is made or any other person) shall have effect as if so much of the relevant aggregate for any year of assessment as does not exceed the amount specified for that year in section 257A(1) of that Act were a qualifying maintenance payment made otherwise than in pursuance of an existing obligation. "

80 Limit on relief for interest

For each of the years 1994-95 and 1995-96 the qualifying maximum defined in section 367(5) of the Taxes Act 1988 (limit on relief for interest on certain loans) shall be £30,000.

81 Mortgage interest relief etc

(1) For subsection (1) of section 353 of the Taxes Act 1988 (general provision for relief for interest payments) there shall be substituted the following subsection--

" (1) Where a person pays interest in any year of assessment, that person, if he makes a claim to the relief, shall for that year of assessment be entitled (subject to sections 354 to 368) to relief in accordance with this section in respect of so much (if any) of the amount of that interest as is eligible for relief under this section by virtue of sections 354 to 365. "

(2) After that subsection there shall be inserted the following subsections--

" (1A) Where a person is entitled for any year of assessment to relief under this section in respect of any amount of interest which--

(a) is eligible for that relief by virtue of section 354 or 365, and

(b) so far as eligible by virtue of section 354, is so eligible in a case which falls, or is treated as falling, within section 355(1)(a), 356 or 358,

that relief shall consist in an income tax reduction for that year calculated by reference to that amount.

(1B) Where a person is entitled for any year of assessment to relief under this section in respect of any amount of interest which--

(a) is eligible for that relief otherwise than by virtue of section 354 or 365, or

(b) is eligible for that relief by virtue of section 354 in a case falling within section 355(1)(b),

that relief shall consist (subject to sections 237(5)(b) and 355(4)) in a deduction or set-off of that amount from or against that person's income for that year.

(1C) Without prejudice to subsection (1E) below, where the whole or any part of an amount of interest is eligible for relief under this section by virtue of section 354 in a case which (apart from this subsection) would fall, or be treated as falling, within both section 355(1)(a) or 356 and section 355(1)(b), then that case shall be treated for the purposes of this section and the following provisions of this Act--

(a) except in relation to payments to which an election made for the purposes of this subsection by the person entitled to the relief applies, as falling within section 355(1)(b) and not within section 355(1)(a) or 356; and

(b) in relation to payments to which such an election does apply, as falling within section 355(1)(a) or, as the case may be, 356, and not within section 355(1)(b).

(1D) An election for the purposes of subsection (1C)--

(a) shall be made, and may be withdrawn, by the giving of written notice to an officer of the Board;

(b) shall apply to every payment of interest which--

(i) is made after the time specified in the notice of that election as the time as from which it takes effect; and

(ii) is not made after a time specified in a notice of the withdrawal of that election as the time as from which that election is withdrawn;

(c) shall not be made so as to take effect as from any time except the beginning of a year of assessment or a time as from which the conditions for the case to fall, or be treated as falling, within both section 355(1)(a) or 356 and section 355(1)(b) have begun to be satisfied in relation to payments of interest on the loan in question;

(d) shall not be withdrawn except as from the beginning of a year of assessment; and

(e) shall not be made so as to take effect, and shall not be withdrawn, as from any time before the beginning of the year of assessment immediately before that in which the notice of the election or, as the case may be, of the withdrawal is given to an officer of the Board.

(1E) Where any person is entitled for any year of assessment to relief under this section in respect of any amount of interest as is eligible for that relief partly as mentioned in subsection (1A) above and partly as mentioned in subsection (1B) above, that amount of interest shall be apportioned between the cases to which each of those subsections applies without regard to what parts of the total amount borrowed remain outstanding but according to the following factors, that is to say--

(a) the proportions of the total amount borrowed which were applied for different purposes; and

(b) in the case of so much of any amount of interest which is, or in pursuance of an apportionment under paragraph (a) above is treated as, eligible for relief by virtue of section 354, the different uses to which the land or other property in question is put from time to time;

and subsection (1A) or (1B) above shall apply accordingly in relation to the interest apportioned to the case to which that subsection applies.

(1F) Where any person is entitled under this section for any year of assessment to an income tax reduction calculated by reference to an amount of interest, the amount of that person's liability for that year to income tax on his total income shall be the amount to which he would have been liable apart from this section less whichever is the smaller of--

(a) the amount equal to the applicable percentage of that amount of interest; and

(b) the amount which reduces his liability to nil.

(1G) In subsection (1F) above "the applicable percentage"--

(a) in relation to so much of any interest as is eligible for relief under this section by virtue of section 354, means 20 per cent.; and

(b) in relation to so much of any interest as is eligible for relief under this section by virtue of section 365, means the percentage which is the basic rate for the year of assessment in question;

but, in relation to any payment of interest which (whenever falling due) is made in the year 1995-96 or any subsequent year of assessment, paragraph (a) above shall have effect with the substitution of "15 per cent." for "20 per cent."

(1H) In determining for the purposes of subsection (1F) above the amount of income tax to which a person would be liable apart from any income tax reduction under this section, no account shall be taken of--

(a) any income tax reduction under Chapter I of Part VII or section 347B;

(b) any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 or by way of a credit under section 790(1); or

(3) In subsection (1) of section 369 of that Act (deduction at source of mortgage interest relief), for the words from "income tax" onwards there shall be substituted "the applicable percentage thereof." and after that subsection there shall be inserted the following subsection--

" (1A) In subsection (1) above "the applicable percentage"--

(a) in relation to so much of any payment of relevant loan interest as is not a payment in relation to which paragraph (b) below has effect, means 20 per cent.; and

(b) in relation to so much of any payment as--

(i) has become due before 6th April 1994; or

(ii) being a payment becoming due on or after 6th April 1994, would, apart from section 353(2), be eligible for relief under section 353 by virtue of section 365,

means the percentage which is the basic rate for the year of assessment in which the payment has become or becomes due;

but, in relation to any payment of interest which becomes due in the year 1995-96 or any subsequent year of assessment, paragraph (a) above shall have effect with the substitution of "15 per cent." for "20 per cent." "

(4) For subsections (3) to (5B) of section 369 of that Act (provisions balancing deduction of relevant loan interest from income against charge to tax) there shall be substituted the following subsection--

" (3) The following payments, that is to say--

(a) payments of relevant loan interest to which this section applies, and

(b) payments which would be such payments but for section 373(5),

shall not be allowable as deductions for any purpose of the Income Tax Acts except in so far as they fall to be treated as such payments by virtue only of section 375(2) and would be allowable apart from this subsection. "

(5) Schedule 9 to this Act (which for the purposes of or in connection with the provisions of this section makes further modifications of certain enactments in relation to tax relief on interest payments) shall have effect.

(6) The preceding provisions of this section and that Schedule--

(a) shall have effect in relation to payments of interest made on or after 6th April 1994 (whenever falling due); and

(b) shall also have effect, so far as they relate to relevant loan interest, in relation to any payments of interest becoming due on or after 6th April 1994 which have been made at any time before that date but on or after 30th November 1993.

(7) Any provision made before the passing of this Act by reference to the basic rate of income tax and contained in any instrument or agreement under or in accordance with which payments of relevant loan interest have been or are to be made shall be taken, in relation to any such payment as is mentioned in subsection (6)(a) or (b) above, to have been made, instead, by reference to a rate which, in the case of that payment, is the applicable percentage for the purposes of subsection (1) of section 369 of the Taxes Act 1988.

(8) Section 377 of the Taxes Act 1988 (variation of terms of repayment of certain loans) shall have effect--

(a) as if the references in subsections (3), (4) and (7) of that section to a change in the basic rate of income tax included references to the amendments having effect by virtue of this section and to any change in the applicable percentage for the time being specified in section 369(1A) of that Act; and

(b) in relation to any notice under section 377(2)(a) of that Act the effective date of which is on or after 6th April 1994, as if the reference to tax at the basic rate for the year of assessment in which that date falls, were a reference to tax at a rate equal to the percentage which is the applicable percentage for the purposes of section 369(1) of that Act in relation to payments becoming due in that year of assessment.

(9) In this section "relevant loan interest" has the same meaning as in Part IX of the Taxes Act 1988.

82 Relief for blind persons

(1) In section 265(1) of the Taxes Act 1988 (blind person's allowance) for "£1,080" there shall be substituted "£1,200".

(2) This section shall apply for the year 1994-95 and subsequent years of assessment.

83 Medical insurance

Schedule 10 to this Act (which contains provisions about medical insurance) shall have effect.

84 Relief for vocational training

(1) In subsection (1) of section 32 of the [1991 c. 31.] Finance Act 1991 (relief for vocational training), after paragraph (c) there shall be inserted the following paragraphs--

" (ca) the individual 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,

(cb) the individual undertakes the course neither wholly nor mainly for recreational purposes or as a leisure activity, " .

(2) In subsection (10) of that section, the words after paragraph (b) (which exclude from the qualifying courses those programmes of activity capable of counting towards a qualification at the highest defined level) shall be omitted.

(3) After subsection (10) of that section there shall be inserted the following subsection--

" (11) In this section--

"school" means any institution at which full-time education is provided to persons at least some of whom are under school-leaving age; and
"school-leaving age" means the age of sixteen. "

(4) This section has effect in relation to payments made on or after 1st January 1994.

Corporation tax charge and rate

85 Charge and rate of corporation tax for 1994

Corporation tax shall be charged for the financial year 1994 at the rate of 33 per cent.

86 Small companies

(1) For the financial year 1994--

(a) the small companies' rate shall be 25 per cent., and

(b) the fraction mentioned in section 13(2) of the Taxes Act 1988 (marginal relief for small companies) shall be one fiftieth.

(2) In section 13(3) of that Act (limits of marginal relief) in paragraphs (a) and (b)--

(a) for "£250,000" there shall be substituted "£300,000", and

(b) for "£1,250,000" there shall be substituted "£1,500,000".

(3) Subsection (2) above shall have effect for the financial year 1994 and subsequent financial years; and where by virtue of that subsection section 13 of the Taxes Act 1988 has effect with different relevant maximum amounts in relation to different parts of a company's accounting period, then for the purposes of that section those parts shall be treated as if they were separate accounting periods and the profits and basic profits of the company for that period shall be apportioned between those parts.

Benefits in kind

87 Car fuel

(1) In section 158 of the Taxes Act 1988 (car fuel) for the Tables in subsection (2) (tables of cash equivalents) there shall be substituted--

" TABLE A

Cylinder capacity of car in cubic centimetres	Cash equivalent
1,400 or less	£640
More than 1,400 but not more than 2,000	£810
More than 2,000	£1,200

TABLE AB

Cylinder capacity of car in cubic centimetres	Cash equivalent
2,000 or less	£580
More than 2,000	£750

TABLE B

Description of car	Cash equivalent
Any car	£1,200 "

(2) This section shall have effect for the year 1994-95 and subsequent years of assessment.

88 Beneficial loan arrangements

(1) In section 160(1) of the Taxes Act 1988 (charge to tax of benefit of loan obtained by reason of employment) for the words following paragraph (b) there shall be substituted--

" an amount equal to whatever is the cash equivalent of the benefit of the loan for that year shall, subject to the provisions of this Chapter, be treated as emoluments of the employment, and accordingly chargeable to tax under Schedule E; and where that amount is so treated, the employee is to be treated as having paid interest on the loan in that year of the same amount.

(1A) Interest treated as paid by virtue of subsection (1) above--

(a) shall be treated as paid for all the purposes of the Tax Acts (other than this Chapter, including Schedule 7), but shall not be treated for any purpose as income of the person making the loan or be treated as relevant loan interest to which section 369 applies, and

(b) shall be treated as accruing during, and paid by the employee at the end of, the year or, if different, the period in the year during which he is employed in employment to which this Chapter applies and the loan is outstanding.

(1B) All the loans between the same lender and borrower which--

(a) are outstanding at any time, as to any amount, in any year,

(b) are not qualifying loans, and

are, if a cash equivalent for them falls to be ascertained, to be treated for the purposes of subsections (1) and (1A) above and Part II of Schedule 7 as a single loan.

(1C) In this section and section 161 "qualifying loan" means any loan made to any person where, assuming interest is being paid on the loan (whether or not it is in fact being paid), the whole or any part of the interest--

(a) is eligible for relief under section 353 or would be so eligible but for subsection (2) of that section or section 357(1)(b), or

(b) is deductible in computing the amount of the profits or gains to be charged under Case I or II of Schedule D in respect of a trade, profession or vocation carried on by him. "

(2) At the end of section 160(5) of that Act (interpretation, including "official rate of interest") there shall be added-- " and, without prejudice to the generality of section 178 of the [1989 c. 26.] Finance Act 1989, regulations under that section may make different provision in relation to a loan outstanding for the whole or part of a year if--

(i) it was made in the currency of a country or territory outside the United Kingdom,

(ii) the benefit of the loan is obtained by reason of the employment of a person who normally lives in that country or territory, and

(iii) that person has lived in that country or territory at some time in the period of six years ending with that year " .

(3) For section 161(1) of that Act (exemption for loans the cash equivalent of which does not exceed £300) there shall be substituted--

" (1) The cash equivalent of the benefit of any such loan as is referred to in section 160(1) is not to be treated as emoluments of the employment if--

(a) at no time in the year does the amount outstanding on the loan (or, if two or more such loans as are referred to in section 160(1) are outstanding in the year, the aggregate of the amounts outstanding on them) exceed £5000, or

(b) where paragraph (a) above does not apply, the loan is not a qualifying loan and at no time in the year does the amount outstanding on the loan (or, if two or more such loans as are referred to in section 160(1) and are not qualifying loans are outstanding in the year, the aggregate of the amounts outstanding on them) exceed £5000.

(1A) Section 160(1) does not in any year apply to a loan made at any time in that or an earlier year by a person in the ordinary course of a business carried on by him which includes the lending of money if--

(a) comparable loans were available, at the time the loan in question was made, to all those who might be expected to avail themselves of the services which he provides in the course of that business,

(b) of the total number of the loan in question and comparable loans made by him at or about the time the loan in question was made, a substantial proportion were made to members of the public at large with whom he was dealing at arm's length, and

(c) the loan in question, and comparable loans in general made by him at or about that time to members of the public at large with whom he was dealing at arm's length, are held on the same terms and, if those terms differ from the terms applicable immediately after the loan was first made, they were imposed in the ordinary course of his business.

(1B) For the purposes of subsection (1A) above, a loan is comparable to the loan in question if it is made for the same or similar purposes, and on the same terms and conditions, as that loan. "

(4) In Schedule 7 to that Act (beneficial loan arrangements)--

(a) in paragraph 1(5) for "Sub-paragraph (2) above does" there shall be substituted "Sub-paragraphs (2) and (4) above do" and the words "his employer, being" shall cease to have effect, and

(b) Parts III to V shall cease to have effect.

(5) In determining for the purposes of section 161(1A) and (1B) of that Act (inserted by this section) whether any loans made by any person before 1st June 1994 are made or held on the same terms or conditions, there shall be left out of account any amounts, by way of fees, commission or other incidental expenses, incurred for the purpose of obtaining any of those loans by the persons to whom they are made.

(6) This section shall have effect for the year 1994-95 and subsequent years of assessment.

89 Vouchers and credit-tokens

(1) Section 141 of the Taxes Act 1988 (non-cash vouchers) shall be amended as follows.

(2) In subsection (1)--

(a) in paragraph (a), for the words from "the expense incurred" to "exchanged;" there shall be substituted " the expense incurred ("the chargeable expense")--

(i) by the person at whose cost the voucher and the money, goods or services for which it is capable of being exchanged are provided,

(ii) in or in connection with that provision; " and

(b) the words following paragraph (b) shall be omitted.

(3) In subsection (6B), in paragraph (a) for the words "the person providing the non-cash voucher" there shall be substituted "the person at whose cost the voucher and the entertainment are provided".

(4) Section 142 of the Taxes Act 1988 (credit-tokens) shall be amended as follows.

(5) In subsection (1)(a), for the words from "the expense incurred" to "obtained;" there shall be substituted " the expense incurred--

(i) by the person at whose cost the money, goods or services are provided,

(ii) in or in connection with that provision; " .

(6) In subsection (3) for the words "providing the credit-token as mentioned in subsection (1)(a) above" there shall be substituted "mentioned in subsection (1)(a)(i) above".

(7) In subsection (3B), in paragraph (a) for the words "providing the credit-token" there shall be substituted "mentioned in subsection (1)(a)(i) above".

(8) Section 143 of the Taxes Act 1988 (cash vouchers) shall be amended as follows.

(9) In subsection (1) for the words from "(and in particular section 203)" to "paid by his employer" there shall be substituted " --

(a) he shall be treated as having received " .

(10) In subsection (3) for the words "in providing the voucher by the person who provides it" there shall be substituted "by the person at whose cost the voucher is provided".

(11) In subsection (4)--

(a) in paragraph (a) for the words "in providing the voucher by the person who provides it" there shall be substituted "by the person at whose cost the voucher, stamp or similar document is provided"; and

(b) in the words following paragraph (b) for the words from "the expense incurred" to the end there shall be substituted "the expense incurred by the person mentioned in paragraph (a) above shall be treated as reduced by the difference or part of the difference mentioned in paragraph (b) above."

(12) Section 144 of the Taxes Act 1988 (supplementary provisions relating to sections 141 to 143) shall be amended as follows.

(13) In subsection (1)--

(a) for the words "or credit-tokens" there shall be substituted ", credit-tokens or cash vouchers"; and

(b) for the words "141 or 142" there shall be substituted "141, 142 or 143".

(14) In subsection (3)--

(a) for the words "141 and 142" there shall be substituted "141, 142 and 143"; and

(b) for the words "by him of non-cash" there shall be substituted "of".

Chargeable gains

90 Annual exempt amount for 1994-95

For the year 1994-95 section 3 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (annual exempt amount) shall have effect as if the amount specified in subsection (2) were £5,800, and accordingly subsection (3) of that section (indexation) shall not apply for that year.

91 Relief on re-investment

(1) Schedule 11 to this Act (which extends the relief on re-investment for individuals and trustees provided by Chapter IA of Part V of the Taxation of Chargeable Gains Act 1992) shall have effect.

(2) That Schedule shall have effect in relation to disposals made on or after 30th November 1993.

(3) In section 164H(1) of that Act--

(a) for "is greater than" there shall be substituted "exceeds", and

(b) at the end there shall be added "or half the value of the company's assets as a whole (whichever is the greater); and section 294(3) and (4) of the Taxes Act (meaning of value of company's assets as a whole) applies for the purposes of this subsection as it applies for the purposes of section 294 of that Act".

(4) Subsection (3) above shall apply to determine whether a company is a qualifying company on or after 30th November 1993.

92 Relief on retirement

(1) In paragraph 13(1) of Schedule 6 to the Taxation of Chargeable Gains Act 1992 (amount available for relief on retirement)--

(a) in paragraph (a) (gains not exceeding appropriate percentage of £150,000) for "£150,000" there shall be substituted "£250,000", and

(b) in paragraph (b) (half gains not exceeding that percentage of £150,000 to £600,000) for "£150,000" and "£600,000" there shall be substituted respectively "£250,000" and "£1 million".

(2) This section shall have effect in relation to disposals made on or after 30th November 1993.

93 Indexation losses

(1) In section 53 of the Taxation of Chargeable Gains Act 1992 (indexation allowance), in subsection (1), for the words following "contrary" to the end of paragraph (c) there shall be substituted " if on the disposal of an asset there is an unindexed gain, an allowance ("the indexation allowance") shall be allowed against the unindexed gain--

(a) so as to give the gain for the purposes of this Act, or

(b) if the indexation allowance equals or exceeds the unindexed gain, so as to extinguish it (in which case the disposal shall be one on which, after taking account of the indexation allowance, neither a gain nor a loss accrues) " .

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

(a) for "subsection (1) above" there shall be substituted "this Chapter",

(b) for paragraph (a) there shall be substituted--

" (a) "unindexed gain" means the amount of the gain on the disposal computed in accordance with this Part " , and

(3) After that subsection there shall be inserted--

" (2A) Notwithstanding anything in section 16 of this Act, this section shall not apply to a disposal on which a loss accrues. "

(4) In section 55 of that Act (assets acquired on a no gain/no loss disposal), after subsection (6) there shall be inserted--

" (7) The rules in subsection (8) below apply (after the application of section 53 but before the application of section 35(3) or (4)) to give the gain or loss for the purposes of this Act where--

(a) subsection (6) above applies to the disposal (the "disposal in question") of an asset by any person (the "transferor"), and

(b) but for paragraph (b) of that subsection, the consideration the transferor would be treated as having given for the asset would include an amount or amounts of indexation allowance brought into account by virtue of section 56(2) on any disposal made before 30th November 1993.

(8) The rules are as follows--

(a) where (apart from this subsection) there would be a loss, an amount equal to the rolled-up indexation shall be added to it so as to increase it,

(b) where (apart from this subsection) the unindexed gain or loss would be nil, there shall be a loss of an amount equal to the rolled-up indexation, and

(i) there would be an unindexed gain, and

(ii) the gain or loss would be nil but the amount of the indexation allowance used to extinguish the gain would be less than the rolled-up indexation,

the difference shall constitute a loss.

(9) In this section the "rolled-up indexation" means, subject to subsections (10) and (11) below, the amount or, as the case may be, the aggregate of the amounts referred to in subsection (7)(b) above; and subsections (10) and (11) below shall, as well as applying on the disposal in question, be treated as having applied on any previous part disposal by the transferor.

(10) Where, for the purposes of any disposal of the asset by the transferor, any amount falling within any, or any combination of, paragraphs (a) to (c) of section 38(1) is required by any enactment to be excluded, reduced or written down, the amount or aggregate referred to in subsection (9) above (or so much of it as remains after the application of this subsection and subsection (11) below on a previous part disposal) shall be reduced in proportion to any reduction made in the amount falling within the paragraph, or the combination of paragraphs, in question.

(11) Where the transferor makes a part disposal of the asset at any time, then, for the purposes of that and any subsequent disposal, the amount or aggregate referred to in subsection (9) above (or so much of it as remains after the application of this subsection and subsection (10) above on a previous part disposal by him or after the application of subsection (10) above on the part disposal) shall be apportioned between the property disposed of and the property which remains in the same proportions as the sums falling within section 38(1)(a) and (b). "

(5) In section 56 of that Act (amount of consideration on no gain/no loss disposals)--

(a) in subsection (2) for the words preceding paragraph (a) there shall be substituted "On a no gain/no loss disposal by any person ("the transferor")", and

(b) after that subsection there shall be added--

" (3) Where apart from this subsection--

(a) a loss would accrue on the disposal of an asset, and

(b) the sums allowable as a deduction in computing that loss would include an amount attributable to the application of the assumption in subsection (2) above on any no gain/no loss disposal made on or after 30th November 1993,

those sums shall be determined as if that subsection had not applied on any such disposal made on or after that date and the loss shall be reduced accordingly or, if those sums are then equal to or less than the consideration for the disposal, the disposal shall be one on which neither a gain nor a loss accrues.

(4) For the purposes of this section a no gain/no loss disposal is one which, by virtue of any enactment other than section 35(4), 53(1) or this section, is treated as a disposal on which neither a gain nor a loss accrues to the person making the disposal. "

(6) In section 110 of that Act (indexation allowance for share pools), after subsection (6) there shall be inserted--

" (6A) Where a disposal to a person acquiring or adding to a new holding is treated by virtue of any enactment as one on which neither a gain nor a loss accrues to the person making the disposal--

(a) section 56(2) shall not apply to the disposal (and, accordingly, the amount of the consideration shall not be calculated on the assumption that a gain of an amount equal to the indexation allowance accrues to the person making the disposal), but

(b) an amount equal to the indexation allowance on the disposal shall be added to the indexed pool of expenditure for the holding acquired or, as the case may be, held by the person to whom the disposal is made (and, where it is added to the indexed pool of expenditure for a holding so held, it shall be added after any increase required by subsection (8)(a) below). "

(7) Sections 103 (collective investment schemes, etc.), 111 (building society etc. shares), 182 to 184 (groups and associated companies) and 200 (oil industry assets) of that Act (all of which relate to indexation allowance) shall cease to have effect.

(8) In Schedule 7A to that Act (restriction on set-off of pre-entry losses), in paragraph 2--

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