Finance Act 1994 (c. 9)

(The document as of February, 2008)

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(c) the trust instrument is not altered as mentioned in subsection (12)(b) above before what would be the new holding comes into being,

subsection (4) above shall not apply in relation to the scheme.

(14) Subsection (6) above shall not imply a contrary intention for the purposes of section 20(2) of the [1978 c. 30.] Interpretation Act 1978 in its application to other references to paragraph 5 of Schedule 10 to the Taxes Act 1988.

Employee share ownership trusts

102 Employee share ownership trusts

Schedule 13 to this Act (which contains provisions about employee share ownership trusts) shall have effect.

Retirement benefits schemes

103 The administrator

(1) The following section shall be inserted after section 611 of the Taxes Act 1988--

" 611AA Definition of the administrator

(1) In this Chapter references to the administrator, in relation to a retirement benefits scheme, are to the person who is, or the persons who are, for the time being the administrator of the scheme by virtue of the following provisions of this section.

(2) Subject to subsection (7) below, where--

(a) the scheme is a trust scheme, and

(b) at any time the trustee, or any of the trustees, is or are resident in the United Kingdom,

the administrator of the scheme at that time shall be the trustee or trustees of the scheme.

(3) Subject to subsection (7) below, where--

(a) the scheme is a non-trust scheme, and

(b) at any time the scheme sponsor, or any of the scheme sponsors, is or are resident in the United Kingdom,

the administrator of the scheme at that time shall be the scheme sponsor or scheme sponsors.

(4) At any time when the trustee of a trust scheme is not resident in the United Kingdom or (if there is more than one trustee) none of the trustees is so resident, the trustee or trustees shall ensure that there is a person, or there are persons--

(a) resident in the United Kingdom, and

(b) appointed by the trustee or trustees to be responsible for the discharge of all duties relating to the scheme which are imposed on the administrator under this Chapter.

(5) At any time when the scheme sponsor of a non-trust scheme is not resident in the United Kingdom or (if there is more than one scheme sponsor) none of the scheme sponsors is so resident, the scheme sponsor or scheme sponsors shall ensure that there is a person, or there are persons--

(a) resident in the United Kingdom, and

(b) appointed by the scheme sponsor or scheme sponsors to be responsible for the discharge of all duties relating to the scheme which are imposed on the administrator under this Chapter.

(6) Without prejudice to subsections (4) and (5) above--

(a) the trustee or trustees of a trust scheme, or

(b) the scheme sponsor or scheme sponsors of a non-trust scheme,

may at any time appoint a person who is, or persons who are, resident in the United Kingdom to be responsible for the discharge of all duties relating to the scheme which are imposed on the administrator under this Chapter.

(7) Where at any time there is or are a person or persons--

(a) for the time being appointed under subsection (4), (5) or (6) above as regards a scheme, and

(b) resident in the United Kingdom,

the administrator of the scheme at that time shall be that person or those persons (and no other person).

(8) Any appointment under subsection (4), (5) or (6) above--

(a) must be in writing, and

(b) if made after the time when the scheme is established, shall constitute an alteration of the scheme for the purposes of section 591B(2).

(9) In this section--

(a) references to a trust scheme are to a retirement benefits scheme established under a trust or trusts;

(b) references to the trustee or trustees, in relation to a trust scheme and to a particular time, are to the person who is the trustee, or the persons who are the trustees, of the scheme at that time;

(d) references to the scheme sponsor or scheme sponsors, in relation to a retirement benefits scheme and to a particular time, are references to any person who established the scheme and is in existence at that time or, if more than one, all such persons. "

(2) In consequence of subsection (1) above, in section 612(1) of the Taxes Act 1988 (interpretation of Chapter I of Part XIV) the definition of "administrator" shall cease to have effect.

(3) This section--

(a) so far as it relates to section 591B(1) of the Taxes Act 1988, shall apply in relation to notices given on or after the day on which this Act is passed;

(b) so far as it relates to section 593(3) of that Act, shall apply in relation to contributions paid on or after that day;

(c) so far as it relates to section 596A(3) of that Act, shall apply in relation to benefits received on or after that day;

(d) so far as it relates to sections 598(2) and (4), 599(3) and 599A(2) of that Act, shall apply in relation to payments made on or after that day;

(e) so far as it relates to section 602(1) and (2) of that Act and regulations made under section 602, shall apply in relation to amounts becoming recoverable on or after that day;

(f) so far as it relates to section 604(1) of that Act, shall apply in relation to applications made on or after that day;

(g) so far as it relates to section 605(1) and (4) of that Act, shall apply in relation to notices given on or after that day.

104 Default of administrator etc

(1) The following section shall be substituted for section 606 of the Taxes Act 1988--

" 606 Default of administrator etc

(1) This section applies in relation to a retirement benefits scheme if at any time--

(a) there is no administrator of the scheme, or

(b) the person who is, or all of the persons who are, the administrator of the scheme cannot be traced, or

(c) the person who is, or all of the persons who are, the administrator of the scheme is or are in default for the purposes of this section.

(2) If the scheme is a trust scheme, then--

(a) if subsection (1)(b) or (c) above applies and at the time in question the condition mentioned in subsection (3) below is fulfilled, the trustee or trustees shall at that time be responsible for the discharge of all duties imposed on the administrator under this Chapter (whenever arising) and liable for any tax due from the administrator in the administrator's capacity as such (whenever falling due);

(b) if subsection (1)(a) above applies, or subsection (1)(b) or (c) above applies and at the time in question the condition mentioned in subsection (3) below is not fulfilled, the employer shall at that time be so responsible and liable;

and paragraph (b) above shall apply to a person in his capacity as the employer even if he is also the administrator, or a trustee, of the scheme.

(3) The condition is that there is at least one trustee of the scheme who--

(a) can be traced,

(b) is resident in the United Kingdom, and

(4) If the scheme is a non-trust scheme, then--

(a) if subsection (1)(b) or (c) above applies and at the time in question the condition mentioned in subsection (5) below is fulfilled, the scheme sponsor or scheme sponsors shall at that time be responsible for the discharge of all duties imposed on the administrator under this Chapter (whenever arising) and liable for any tax due from the administrator in the administrator's capacity as such (whenever falling due);

(b) if subsection (1)(a) above applies, or subsection (1)(b) or (c) above applies and at the time in question the condition mentioned in subsection (5) below is not fulfilled, the employer shall at that time be so responsible and liable;

and paragraph (b) above shall apply to a person in his capacity as the employer even if he is also the administrator of the scheme, or a scheme sponsor.

(5) The condition is that there is at least one scheme sponsor who--

(a) can be traced,

(b) is resident in the United Kingdom, and

(6) Where at any time--

(a) paragraph (b) or (c) of subsection (1) above applies in relation to a scheme, and

(b) a person is by virtue of this section responsible for the discharge of any duties, or liable for any tax, in relation to the scheme,

then at that time the person or persons mentioned in paragraph (b) or (as the case may be) paragraph (c) of subsection (1) above shall not, by reason only of being the administrator of the scheme, be responsible for the discharge of those duties or liable for that tax.

(7) Where the scheme is a trust scheme and the employer is not a contributor to the scheme, subsection (2) above shall have effect as if--

(a) for "the employer", in the first place where those words occur, there were substituted "the scheme sponsor or scheme sponsors", and

(b) for "the employer", in the second place where those words occur, there were substituted "scheme sponsor".

(8) Where the scheme is a non-trust scheme and the employer is not a contributor to the scheme, subsection (4) above shall have effect as if paragraph (b) and the words after that paragraph were omitted.

(9) No liability incurred under this Chapter--

(a) by the administrator of a scheme, or

(b) by a person by virtue of this section,

shall be affected by the termination of a scheme or by its ceasing to be an approved scheme or to be an exempt approved scheme.

(10) Where by virtue of this section a person becomes responsible for the discharge of any duties, or liable for any tax, the Board shall, as soon as is reasonably practicable, notify him of that fact; but any failure to give such notification shall not affect that person's being responsible or liable by virtue of this section.

(11) A person is in default for the purposes of this section if--

(a) he has failed to discharge any duty imposed on him under this Chapter, or

(b) he has failed to pay any tax due from him by virtue of this Chapter,

and (in either case) the Board consider the failure to be of a serious nature.

(12) References in this section to a trust scheme, a non-trust scheme, trustees and scheme sponsors shall be construed in accordance with section 611AA.

(13) References in this section to the employer include, where the employer is resident outside the United Kingdom, references to any branch or agent of the employer in the United Kingdom, and in this subsection "branch or agent" has the meaning given by section 118(1) of the Management Act.

(14) This section does not apply for the purposes of sections 602 and 603 and Schedule 22. "

(2) In consequence of subsection (1) above, in section 607(3)(b)(iii) of the Taxes Act 1988 for the words "section 606(1) and (3)" there shall be substituted "section 606(2)(b), (4)(b), (7), (8) and (13)".

(3) This section shall apply where the time in question falls on or after the day on which this Act is passed.

105 Information

(1) The Taxes Act 1988 shall be amended in accordance with subsections (2) and (3) below.

(2) In section 605 (information) at the beginning there shall be inserted the following subsections--

" (1A) The Board may by regulations make any of the following provisions--

(a) provision requiring prescribed persons to furnish to the Board at prescribed times information relating to any of the matters mentioned in subsection (1B) below;

(b) provision enabling the Board to serve a notice requiring prescribed persons to furnish to the Board, within a prescribed time, particulars relating to any of those matters;

(c) provision enabling the Board to serve a notice requiring prescribed persons to produce to the Board, within a prescribed time, documents relating to any of those matters;

(d) provision enabling the Board to serve a notice requiring prescribed persons to make available for inspection on behalf of the Board books, documents and other records, being books, documents and records which relate to any of those matters;

(e) provision requiring prescribed persons to preserve for a prescribed time books, documents and other records, being books, documents and records which relate to any of those matters.

(1B) The matters referred to in subsection (1A) above are--

(a) an approved scheme;

(b) a relevant statutory scheme;

(c) an annuity contract by means of which benefits provided under an approved scheme or a relevant statutory scheme have been secured;

(d) a retirement benefits scheme which is not an approved scheme but in relation to which an application for approval for the purposes of this Chapter has been made.

(1C) A person who fails to comply with regulations made under subsection (1A)(e) above shall be liable to a penalty not exceeding £3,000.

(1D) Regulations under subsection (1A) above may make different provision for different descriptions of case.

(1E) In subsection (1A) above "prescribed" means prescribed by regulations made under that subsection. "

(3) Subsections (1) and (2) of section 605 shall cease to have effect.

(4) In section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties for failure to provide information etc.)--

(a) in the first column of the Table after the entry "regulations under section 602;" there shall be inserted the entry "regulations under section 605(1A)(b) to (d);";

(b) in the first column of the Table for the entry "section 605(1), (2), (3)(b) and (4);" there shall be substituted the entry "section 605(3)(b) and (4);";

(c) in the second column of the Table after the entry "regulations under section 602;" there shall be inserted the entry "regulations under section 605(1A)(a);".

(5) Subsections (3) and (4)(b) above shall come into force on such day as the Treasury may by order appoint.

106 False statements etc

(1) The following section shall be inserted after section 605 of the Taxes Act 1988--

" 605A False statements etc

(1) A person who fraudulently or negligently makes a false statement or false representation on making an application for the approval for the purposes of this Chapter of--

(a) a retirement benefits scheme, or

(b) an alteration in such a scheme,

shall be liable to a penalty not exceeding £3,000.

(2) In a case where--

(a) a person fraudulently or negligently makes a false statement or false representation, and

(b) in consequence that person, or any other person, obtains relief from or repayment of tax under this Chapter,

the person mentioned in paragraph (a) above shall be liable to a penalty not exceeding £3,000. "

(2) This section shall apply in relation to things done or omitted after the day on which this Act is passed.

107 Discretionary approval

(1) Section 591 of the Taxes Act 1988 (discretionary approval of retirement benefits schemes) shall be amended as follows.

(2) In subsection (2)(g) (annuity contracts)--

(a) after "relevant benefits" there shall be inserted "falling within subsection (2A) below";

(b) the words "approved by the Board and" shall be omitted.

(3) The following subsection shall be inserted after subsection (2)--

" (2A) Relevant benefits fall within this subsection if they correspond with benefits that could be provided by an approved scheme, and for this purpose--

(a) a hypothetical scheme (rather than any particular scheme) is to be taken, and

(b) benefits provided by a scheme directly (rather than by means of an annuity contract) are to be taken. "

(4) This section shall apply in relation to a scheme not approved by virtue of section 591 of the Taxes Act 1988 before 1st July 1994.

108 Taxation of benefits of non-approved schemes

(1) Section 596A of the Taxes Act 1988 (taxation of benefits under non-approved schemes) shall be amended as follows.

(2) In subsection (4), at the beginning there shall be inserted "Subject to subsection (9) below".

(3) For subsection (6) there shall be substituted--

" (6) Tax shall not be charged under this section in the case of--

(a) any pension or annuity which is chargeable to tax under Schedule E by virtue of section 19(1); or

(b) any pension or other benefit chargeable to tax under section 58. "

(4) In subsection (7)--

(a) for the words "by virtue of section 19(1)1", in the first place where they occur, there shall be substituted "as mentioned in subsection (6)(a) above";

(b) in paragraph (a), for the words "subsection (6) above" there shall be substituted "subsection (6)(a) above"; and

(5) For subsections (8) and (9) there shall be substituted--

" (8) Subject to subsection (9) below, tax shall not be charged under this section (or section 19(1) or 148) in the case of a lump sum where--

(a) the employer has paid any sum or sums with a view to the provision of any relevant benefits under a retirement benefits scheme;

(b) an employee has been assessed to tax in respect of the sum or sums by virtue of section 595(1); and

(c) the lump sum is provided under the scheme to the employee, any person falling within section 595(5) in relation to the employee or any other individual designated by the employee.

(9) Where any of the income or gains accruing to the scheme under which the lump sum is provided is not brought into charge to tax, tax shall be charged under this section on the amount of the lump sum received less any deduction applicable under subsection (10) or (11) below.

(10) Subject to subsection (11) below, the deduction applicable is the aggregate of--

(a) any sum or sums in respect of which the employee has been assessed as mentioned in subsection (8)(b) above, and

(b) any sum or sums paid by the employee,

which in either case were paid by way of contribution to the provision of the lump sum.

(11) Where--

(a) the lump sum is provided under the scheme on the disposal of a part of any asset or the surrender of any part of or share in any rights in any asset, and

(b) the employee, any person falling within section 595(5) in relation to the employee or any person connected with the employee has any right to receive or any expectation of receiving a further lump sum (or further lump sums) under the scheme on a further disposal of any part of the asset or a further surrender of any part of or share in any rights in the asset,

the deduction applicable shall be determined in accordance with the formula in subsection (12) below.

(12) The formula is--

---

(13) For the purposes of the formula in subsection (12) above--

D is the deduction applicable;
S is the aggregate amount of any sum or sums of a description mentioned in paragraphs (a) and (b) of subsection (10) above;
A is the amount of the lump sum received in relation to which the deduction applicable falls to be determined;
B is the market value of the asset in relation to which the disposal or surrender occurred, on the assumption that the valuation is made immediately before the disposal or surrender.

(14) An individual may not claim that a deduction is applicable in relation to a lump sum more than once.

(15) For the purposes of subsections (8) and (9) above, it shall be assumed unless the contrary is shown--

(a) that no sums have been paid, and the employee has not been assessed in respect of any sums paid, with a view to the provision of relevant benefits;

(b) that the income or gains accruing to a scheme under which the benefit is provided are not brought into charge to tax; and

(16) Section 839 shall apply for the purposes of subsection (11) above.

(17) In subsection (13) above "market value" shall be construed in accordance with section 272 of the 1992 Act. "

(6) The amendments of section 596A made by this section shall have effect in relation to retirement benefit schemes--

(a) entered into on or after 1st December 1993, or

(b) entered into before that day if the scheme is varied on or after that day with a view to the provision of the benefit.

(7) Subject to subsection (8) below, in the Taxes Act 1988--

(a) in section 188(1), paragraph (c), and

(b) in section 189, paragraph (b),

(exemption from tax where recipient of benefit or lump sum chargeable to tax in respect of sums paid or treated as paid with a view to the provision of the benefit or lump sum) shall cease to have effect in relation to any benefit provided or lump sum paid on or after 1st December 1993.

(8) The repeals made by subsection (7) above shall not have effect in relation to any benefit provided or lump sum paid on or after 1st December 1993 in pursuance of a scheme or arrangement entered into before that day unless the scheme or arrangement is varied on or after that day with a view to the provision of the benefit or lump sum.

Annuities

109 Annuities derived from personal pension schemes

(1) In Chapter IV of Part XIV of the Taxes Act 1988 (personal pension schemes) the following shall be inserted after section 648--

" Annuities: charge to tax

648A Annuities: charge under Schedule E

(1) Subject to subsection (2) below, where funds held for the purposes of an approved personal pension scheme are used to acquire an annuity--

(a) the annuity shall be charged to tax under Schedule E and section 203 shall apply accordingly;

(b) the annuity shall not be charged to tax under Case III of Schedule D.

(2) As respects any approved personal pension scheme the Board may direct that, until such date as the Board may specify, annuities acquired with funds held for the purposes of the scheme shall be charged to tax as annual payments under Case III of Schedule D, and tax shall be deductible under sections 348 and 349 accordingly. "

(2) This section shall apply in relation to payments which are made under annuities on or after 6th April 1995.

110 Annuities derived from retirement benefits schemes

(1) In section 597 of the Taxes Act 1988 (pensions paid under retirement benefits schemes generally charged under Schedule E) the following subsection shall be inserted after subsection (2)--

" (3) Without prejudice to subsection (1) above, where funds held for the purposes of any scheme which is approved or is being considered for approval under this Chapter are used to acquire an annuity--

(a) the annuity shall be charged to tax under Schedule E and section 203 shall apply accordingly;

(b) the annuity shall not be charged to tax under Case III of Schedule D. "

(2) This section shall apply in relation to payments which are made under annuities on or after the day on which this Act is passed.

Authorised unit trusts

111 Rate of corporation tax

(1) In section 468E of the Taxes Act 1988 (authorised unit trusts: corporation tax), for subsection (2) (deemed rate of corporation tax) there shall be substituted--

" (2) The rate of corporation tax--

(a) for the financial year 1993, shall be deemed to be 22.5 per cent; and

(b) subject to subsection (3) below and section 468EE, for any other financial year shall be deemed to be the rate at which income tax at the basic rate is charged for the year of assessment which begins on 6th April in the financial year concerned. "

(2) After that section there shall be inserted--

" 468EE Corporation tax: cases where lower rate applies

(1) Where this subsection applies, the rate of corporation tax for the financial year shall be deemed to be the rate at which income tax at the lower rate is charged for the year of assessment which begins on 6th April in that financial year.

(2) Subsection (1) above only applies--

(a) for the financial year 1994 and subsequent financial years; and

(b) where, on a claim made within the period of twelve months from the end of the accounting period which or part of which falls in the financial year concerned, it is shown to the satisfaction of the inspector that throughout that accounting period the condition in subsection (3) below is fulfilled by the investments subject to the trusts of the authorised unit trust.

(3) The condition in this subsection is fulfilled by the investments if the market value of such of those investments as are qualifying investments does not exceed 60 per cent. of the market value of all those investments.

(4) For the purposes of subsection (3) above "qualifying investments" means any of the following investments--

(a) any money placed at interest;

(b) any security--

(i) including any loan stock or similar security whether of the Government of the United Kingdom or of any other government or of any public or local authority in the United Kingdom or elsewhere, or of any company, and whether secured or unsecured, but

(ii) excluding shares in a company;

(d) an entitlement to a share in the investments subject to the trusts of another authorised unit trust, unless, throughout the relevant period, the condition in subsection (5) below is fulfilled by the investments subject to the trusts of that other authorised unit trust.

(5) The condition in this subsection is fulfilled by the investments if the market value of such of the investments as fall within paragraphs (a) to (c) of subsection (4) above does not exceed 60 per cent. of the market value of all those investments.

(6) In subsection (4)(d) above "the relevant period" means the accounting period in relation to which by virtue of subsection (2)(b) above the question whether the entitlement is a "qualifying investment" falls to be determined.

(7) For the purposes of this section "investment" does not include cash awaiting investment.

(8) The Treasury may by order amend this section so as to extend or restrict the meaning of qualifying investments for the purposes of subsection (3) above.

(9) An order under subsection (8) above may contain such transitional provision as the Treasury think necessary or expedient. "

112 Distributions of authorised unit trusts

Schedule 14 to this Act (distributions of authorised unit trusts) shall have effect.

113 Umbrella schemes

(1) In section 468 of the Taxes Act 1988 (authorised unit trusts), in subsection (6) (definitions) at the beginning there shall be inserted "Subject to subsections (7) to (9) below".

(2) After that subsection there shall be added--

" (7) Each of the parts of an umbrella scheme shall be regarded for the purposes of this Chapter as an authorised unit trust and the scheme as a whole shall not be so regarded.

(8) In this section, "umbrella scheme" means a unit trust scheme--

(a) which provides arrangements for separate pooling of the contributions of the participants and the profits or income out of which payments are to be made to them;

(b) under which the participants are entitled to exchange rights in one pool for rights in another; and

and any reference to a part of an umbrella scheme is a reference to such of the arrangements as relate to a separate pool.

(9) In relation to a part of an umbrella scheme, any reference--

(a) to investments subject to the trusts of an authorised unit trust, shall have effect as a reference to such of the investments as under the arrangements form part of the separate pool to which the part of the umbrella scheme relates; and

(b) to a unit holder, shall have effect as a reference to a person for the time being having rights in that separate pool. "

(3) In section 469 of the Taxes Act 1988 (other unit trusts)--

(a) in subsection (1)(a) (application of section) for the words "that is not an authorised unit trust" there shall be substituted "that is neither an authorised unit trust nor an umbrella scheme"; and

(b) after subsection (6) there shall be inserted--

" (6A) In this section "umbrella scheme" has the same meaning as in section 468. "

(4) Subject to what follows, the amendments made by subsections (1) to (3) above shall have effect on and after 1st April 1994 in relation to unit trust schemes and their participants.

(5) Nothing in those amendments shall have effect before the relevant date in relation to a unit trust scheme which immediately before 1st April 1994 falls within the definition of an umbrella scheme contained in those amendments.

(6) In this section "the relevant date", means, in relation to a unit trust scheme, the day after the end of the last distribution period of the scheme which commences before 1st April 1994.

(7) On and after the relevant date, the amendments made by subsections (1) to (3) above shall have effect in relation to a scheme--

(a) to which subsection (5) above applies, and

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