Finance Act 1995 (c. 4)

(The document as of February, 2008)

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26 In section 25(12)(b) of the [1990 c. 29.] Finance Act 1990, for "section 660(3)" substitute "section 347A(7)".

Taxation of Chargeable Gains Act 1992 (c. 12)

27 For section 77 of the Taxation of Chargeable Gains Act 1992 (charge on settlor with interest in settlement), substitute--

" 77 Charge on settlor with interest in settlement.

(1) Where in a year of assessment--

(a) chargeable gains accrue to the trustees of a settlement from the disposal of any or all of the settled property,

(b) after making any deduction provided for by section 2(2) in respect of disposals of the settled property there remains an amount on which the trustees would, disregarding section 3, be chargeable to tax for the year in respect of those gains, and

the trustees shall not be chargeable to tax in respect of those but instead chargeable gains of an amount equal to that referred to in paragraph (b) shall be treated as accruing to the settlor in that year.

(2) Subject to the following provisions of this section, a settlor shall be regarded as having an interest in a settlement if--

(a) any property which may at any time be comprised in the settlement, or any derived property is, or will or may become, payable to or applicable for the benefit of the settlor or his spouse in any circumstances whatsoever, or

(b) the settlor or his spouse enjoys a benefit deriving directly or indirectly from any property which is comprised in the settlement or any derived property.

(3) The references in subsection (2)(a) and (b) above to the spouse of the settlor do not include--

(a) a person to whom the settlor is not for the time being married but may later marry, or

(b) a spouse from whom the settlor is separated under an order of a court, or under a separation agreement or in such circumstances that the separation is likely to be permanent, or

(4) A settlor shall not be regarded as having an interest in a settlement by virtue of subsection (2)(a) above if and so long as none of the property which may at any time be comprised in the settlement, and no derived property, can become payable or applicable as mentioned in that provision except in the event of--

(a) the bankruptcy of some person who is or may become beneficially entitled to the property or any derived property, or

(b) an assignment of or charge on the property or any derived property being made or given by some such person, or

(c) in the case of a marriage settlement, the death of both parties to the marriage and of all or any of the children of the marriage, or

(d) the death of a child of the settlor who had become beneficially entitled to the property or any derived property at an age not exceeding 25.

(5) A settlor shall not be regarded as having an interest in a settlement by virtue of subsection (2)(a) above if and so long as some person is alive and under the age of 25 during whose life the property or any derived property cannot become payable or applicable as mentioned in that provision except in the event of that person becoming bankrupt or assigning or charging his interest in that property.

(6) This section does not apply--

(a) where the settlor dies during the year; or

(b) in a case where the settlor is regarded as having an interest in the settlement by reason only of--

(i) the fact that property is, or will or may become, payable to or applicable for the benefit of his spouse, or

(ii) the fact that a benefit is enjoyed by his spouse,

where the spouse dies, or the settlor and the spouse cease to be married, during the year.

(7) This section does not apply unless the settlor is, and the trustees are, either resident in the United Kingdom during any part of the year or ordinarily resident in the United Kingdom during the year.

(8) In this section "derived property", in relation to any property, means income from that property or any other property directly or indirectly representing proceeds of, or of income from, that property or income therefrom. " .

28 In section 78 of the Taxation of Chargeable Gains Act 1992, in subsections (1), (2) and (3), for "section 77(2)" substitute "section 77".

29 (1) Section 79 of the Taxation of Chargeable Gains Act 1992 is amended as follows.

(2) In subsection (2) omit paragraph (b) and the word "and" preceding it.

(3) Omit subsection (4).

(4) In subsection (5)--

(a) for "subsections (3) and (4)" substitute "subsection (3)"; and

(b) in paragraph (a), omit the words "or income" wherever occurring.

30 In section 97 of the Taxation of Chargeable Gains Act 1992, in subsection (7) for "section 681(4)" substitute "section 660G(1) and (2)".

31 In section 286 of the Taxation of Chargeable Gains Act 1992, for subsection (3) substitute--

" (3) A person, in his capacity as trustee of a settlement, is connected with--

(a) any individual who in relation to the settlement is a settlor,

(b) any person who is connected with such an individual, and

In this subsection "settlement" and "settlor" have the same meaning as in Chapter IA of Part XV of the Taxes Act (see section 660G(1) and (2) of that Act).

(3A) For the purpose of subsection (3) above a body corporate is connected with a settlement if--

(a) it is a close company (or only not a close company because it is not resident in the United Kingdom) and the participators include the trustees of the settlement; or

(b) it is controlled (within the meaning of section 840 of the Taxes Act) by a company falling within paragraph (a) above. " .

32 In Schedule 1 to the Taxation of Chargeable Gains Act 1992, in paragraph 2(7), for "section 681(4)" substitute "section 660G(1) and (2)".

Section 75.

SCHEDULE 18 Deceased persons' estates

Introductory

1 Part XVI of the Taxes Act 1988 shall be amended as follows.

Limited interests in residue

2 (1) In section 695 (limited interests in residue), the words "subject to subsection (3) below" in subsection (2) shall be omitted, and the following subsection shall be substituted for subsection (3)--

" (3) Where, on the completion of the administration of the estate, there is an amount which remains payable in respect of that limited interest, that amount shall be deemed for all tax purposes to have been paid to that person as income for the year of assessment in which the administration period ends or, in the case of a sum which is deemed to be paid in respect of an interest that ceased before the end of that period, for the last year of assessment in which that interest was subsisting. "

(2) This paragraph has effect in relation to any estate the administration of which is completed on or after 6th April 1995.

Absolute interests in residue

3 (1) In section 696 (absolute interests in residue), for subsection (3) there shall be substituted the following subsections--

" (3) When any sum has been paid during the administration period in respect of that absolute interest, that sum, except so far as it is excluded from the operation of this subsection, shall be deemed for all tax purposes to have been paid to that person as income for the year of assessment in which it was actually paid.

(3A) A payment shall be excluded from the operation of subsection (3) above to the extent (if any) that the aggregate of that sum and all the sums which--

(a) have been paid previously during the administration period in respect of that absolute interest, and

(b) fall under this section to be treated as paid to that person as income,

exceeds the aggregated income entitlement of that person for the year of assessment in which the sum is paid.

(3B) For the purposes of this section the aggregated income entitlement of that person for any year of assessment is the amount which would be the aggregate of the amounts received for that year of assessment and all previous years of assessment in respect of the interest if that person had a right in each year to receive, and had received--

(a) in the case of a United Kingdom estate, his residuary income for that year less income tax at the applicable rate for that year; and

(b) in the case of a foreign estate, his residuary income for that year. "

(2) For subsection (5) of that section there shall be substituted the following subsection--

" (5) Where, on the completion of the administration of the estate, the aggregate of all the sums which, apart from this subsection--

(a) have been paid during the administration period in respect of that absolute interest, and

(b) fall under this section to be treated as paid to that person as income,

is exceeded by the aggregated income entitlement of that person for the year of assessment in which the administration of the estate is completed, then an amount equal to the amount of the excess shall be treated for the purposes of subsections (3) to (4) above as having been actually paid, immediately before the end of the administration period, in respect of that interest. "

(3) Sub-paragraph (1) above has effect, subject to sub-paragraph (4) below, in relation to any payment made on or after 6th April 1995; and sub-paragraph (2) above shall have effect in relation to any estate the administration of which is completed on or after 6th April 1995.

(4) Where any sum is deemed by virtue of subsection (3) of section 696 of the Taxes Act 1988 (as it has effect apart from this Schedule) to have been paid to any person as income for the year 1994-95 or any previous year of assessment, that sum shall be treated for the purposes of subsections (3A) and (5) of that section (as they have effect by virtue of this Schedule) as a sum actually paid in respect of that person's absolute interest in that year of assessment.

Supplemental provisions relating to section 696

4 (1) After subsection (1) of section 697 (calculation of residuary income) there shall be inserted the following subsection--

" (1A) For the purpose of ascertaining under subsection (1) above the residuary income of an estate for any year, where the amount of the deductions falling to be made from the aggregate income of the estate for that year (including any falling to be made by virtue of this subsection) exceeds the amount of that income, the excess shall be carried forward and treated for that purpose as an amount falling to be deducted from the aggregate income of the estate for the following year. "

(2) In subsection (2) of that section (reduction of residuary income where benefits received are less than aggregate of residuary income), for the words from "his residuary income for" onwards there shall be substituted "section 696 shall have effect as if the amount of the deficiency were to be applied in reducing the amount taken to be his residuary income for the year in which the administration of the estate is completed and, in so far as the deficiency exceeds that income, in reducing the amount taken to be his residuary income for the previous year, and so on."

(3) Sub-paragraph (1) above has effect for ascertaining the residuary income of an estate for the year 1995-96 or any subsequent year of assessment; and sub-paragraph (2) above has effect in relation to any estate the administration of which is completed on or after 6th April 1995.

Special provisions as to successive interests in residue

5 (1) For subsection (2) of section 698 (special provisions as to successive interests in residue) there shall be substituted the following subsections--

" (1A) Subsection (1B) below applies where--

(a) successively during the administration period there are different persons with interests in the residue of the estate of a deceased person or in parts of such a residue;

(b) the later interest or, as the case may be, each of the later interests arises or is created on the cessation otherwise than by death of the interest that precedes it; and

(1B) Where this subsection applies, this Part shall have effect in relation to any payment made in respect of any of the interests referred to in subsection (1A) above--

(a) as if all those interests were the same interest so that none of them is to be treated as having ceased on being succeeded by any of the others;

(b) as if (subject to paragraph (c) below) the interest which is deemed to exist by virtue of paragraph (a) above ("the deemed single interest") were an interest of--

(i) except in a case to which sub-paragraph (ii) below applies, the person in respect of whose interest or previous interest the payment is made;

(ii) in a case where the person entitled to receive the payment is any other person who has or has had an interest which is deemed to be comprised in the deemed single interest, that other person;

and

(i) the earlier interest or interests had never existed and the absolute interest had always existed;

(ii) the sums (if any) which were deemed in relation to the earlier interest or interests to have been paid as income for any year of assessment to any of the persons entitled thereto were sums previously paid during the administration period in respect of the absolute interest; and

(iii) those sums were sums falling to be treated as sums paid as income to the person entitled to the absolute interest.

(2) Where successively during the administration period there are different persons with absolute interests in the residue of the estate of a deceased person or in parts of such a residue, the aggregate payments and aggregated income entitlement referred to in subsections (3A) and (3B) of section 696 shall be computed for the purposes of that section in relation to an absolute interest subsisting at any time ("the subsequent interest")--

(a) as if the subsequent interest and any previous absolute interest corresponding to the subsequent interest, or relating to any part of the residue to which the subsequent interest relates, were the same interest; and

(b) as if the residuary income for any year of the person entitled to the previous interest were residuary income of the person entitled to the subsequent interest and any amount deemed to be paid as income to the person entitled to the previous interest were an amount deemed to have been paid to the person entitled to the subsequent interest. "

(2) This paragraph has effect in relation to any payment made on or after 6th April 1995 and, so far as it relates to the operation of section 695(3) or 696(5) of the Taxes Act 1988, in relation to any estate the administration of which is completed on or after that date.

Adjustments and information

6 After subsection (4) of section 700 (adjustments and information) there shall be inserted the following subsections--

" (5) It shall be the duty of a personal representative of a deceased person, if a request to do so is made in writing by a person who has, or has had, an absolute or limited interest in the residue of the estate of the deceased or by a person to whom any of the income of the residue of that estate has been paid in the exercise of any discretion, to furnish the person making the request with a statement in writing setting out--

(a) in respect of every amount which has been, or is treated as having been, actually paid to that person in respect of that interest or in the exercise of that discretion, the amount (if any) deemed under this Part to have been paid to him as income for a year of assessment; and

(b) the amount of any tax at the applicable rate which any amount falling within paragraph (a) above is deemed to have borne;

and, where an amount deemed to have been paid as income to any person for any year of assessment is deemed for any of the purposes of this Part to have borne tax on different parts of it at different applicable rates, the matters to be set out in pursuance of paragraphs (a) and (b) above shall be set out separately as respects each part of that amount.

(6) The duty imposed by subsection (5) above shall be enforceable at the suit or instance of the person making the request. "

Interpretation

7 Subsection (14) of section 701 (cases where residuary income has borne income tax at the additional rate) shall cease to have effect.

Section 85.

SCHEDULE 19 Stock lending: interest on cash collateral

Introductory

1 (1) In this Schedule--

(a) "approved stock lending arrangement" means an arrangement such as is mentioned in subsection (1), (2) or (2A) of section 129 and in relation to which that section and section 271(9) of the 1992 Act apply;

(b) "the borrower", in relation to such an arrangement, means the person to whom the securities are transferred under the arrangement; and

(c) "the lender" means the person making that transfer and to whom, in return, securities of the same kind and amount are to be transferred.

(2) References in this Schedule to the borrower or lender under an approved stock lending arrangement include any person acting as the nominee of the borrower or lender.

Treatment of interest earned on cash collateral

2 (1) This paragraph applies where in connection with an approved stock lending arrangement--

(a) the borrower pays to the lender an amount ("cash collateral") by way of security for the performance of the obligation to transfer to the lender securities of the same kind and amount as those transferred by him;

(b) interest is earned by the lender on the whole of the cash collateral in respect of the period for which he holds it, and is paid to him without deduction of tax; and

(c) the lender pays to the borrower an amount ("rebate interest") equal to the amount of interest earned by him on the cash collateral.

(2) Where this paragraph applies--

(a) the interest earned by the lender on the cash collateral shall be treated for all purposes of the Tax Acts as the income of the borrower and not as the income of the lender;

(b) the lender shall not be required to deduct from the payment of rebate interest any sum representing income tax thereon;

(d) the rebate interest shall not be regarded as the income of the borrower.

(3) This paragraph does not apply unless the amount of the rebate interest is identified as such by the parties separately from any fee or other amount payable in connection with the arrangement.

Application of paragraph 2 in case of chain of arrangements

3 (1) Where the lender under one or more approved stock lending arrangements ("the lending arrangements") is also the borrower under one or more other such arrangements ("the borrowing arrangements") entered into to enable him to fulfil his obligations under the former arrangements, the interest which by virtue of paragraph 2(2)(a) above as it applies in relation to the borrowing arrangements is treated as his (the "attributed interest") shall be treated for the purposes of that paragraph as it applies in relation to the lending arrangements as interest earned by him on the cash collateral provided under those arrangements, as follows.

(2) Where the aggregate amount of the cash collateral provided under the borrowing arrangements equals that provided under the lending arrangements, the whole of the attributed interest shall be so treated.

(3) Where the aggregate amount of the cash collateral provided under the borrowing arrangements exceeds that provided under the lending arrangements, a part of the attributed interest shall be so treated.

That part shall be the proportion of the attributed interest which the aggregate amount of the cash collateral provided under the lending arrangements bears to that provided under the borrowing arrangements.

(4) Where the aggregate amount of the cash collateral provided under the borrowing arrangements is less than that provided under the lending arrangements, the attributed interest shall be treated as earned by him on a part of the cash collateral provided under the lending arrangements.

That part shall be an amount equal to the aggregate amount of the cash collateral provided under the borrowing arrangements.

Interpretation

4 In this Schedule--

"relief" means relief by way of--
(i)
deduction in computing profits or gains, or
(ii)
deduction or set off against income or total profits; and
"securities" includes stocks and shares.

Section 107(11).

SCHEDULE 20 Claims etc. not included in returns

Making of claims

1 In Schedule 1A to the Management Act (claims etc.

not included in returns), in sub-paragraph (5) of paragraph 2 (making of claims), for paragraph (b) there shall be substituted the following paragraphs--

" (b) such information as is reasonably required for the purpose of determining whether and, if so, the extent to which the claim is correct;

(bb) the delivery with the claim of such accounts, statements and documents, relating to information contained in the claim, as are reasonably required for the purpose mentioned in paragraph (b) above; " .

Keeping and preserving of records

2 After paragraph 2 of that Schedule there shall be inserted the following paragraph--

" Keeping and preserving of records

2A (1) Any person who may wish to make a claim in relation to a year of assessment or other period shall--

(a) keep all such records as may be requisite for the purpose of enabling him to make a correct and complete claim; and

(b) shall preserve those records until the end of the relevant day.

(2) In relation to a claim, the relevant day for the purposes of sub-paragraph (1) above is whichever of the following is the latest, namely--

(a) where enquiries into the claim or any amendment of the claim are made by an officer of the Board, the day on which, by virtue of paragraph 7(4) below, those enquiries are treated as completed; and

(b) where no enquiries into the claim or any amendment of the claim are so made, the day on which such an officer no longer has power to make such enquiries.

(3) The duty under sub-paragraph (1) above to preserve records may be discharged by the preservation of the information contained in them; and where the information is so preserved a copy of any document forming part of the records shall be admissible in evidence in any proceedings before the Commissioners to the same extent as the records themselves.

(4) Any person who fails to comply with sub-paragraph (1) above in relation to any claim which is made for a year of assessment or accounting period shall be liable to a penalty not exceeding £3,000. "

Amendments of claims

3 In paragraph 3 of that Schedule (amendments of claims), in sub-paragraph (1)(a), for the word "return" there shall be substituted the word "claim".

Giving effect to claims and amendments

4 (1) At the beginning of sub-paragraph (1) of paragraph 4 of that Schedule (giving effect to claims and amendments) there shall be inserted the words "Subject to sub-paragraphs (1A) and (3) below and to any other provision in the Taxes Acts which otherwise provides,".

(2) After that sub-paragraph there shall be inserted the following sub-paragraph--

" (1A) In relation to a claim which would otherwise fall to be taken into account in the making of deductions or repayments of tax under section 203 of the principal Act, sub-paragraph (1) above shall apply as if for the word "shall" there were substituted the word "may". "

(3) At the beginning of sub-paragraph (2) of that paragraph there shall be inserted the words "Subject to sub-paragraph (3) below,".

(4) After the said sub-paragraph (2) there shall be inserted the following sub-paragraph--

" (3) Where any such claim or amendment as is mentioned in sub-paragraph (1) or (2) above is enquired into by an officer of the Board--

(a) that sub-paragraph shall not apply until the day on which, by virtue of paragraph 7(4) below, the officer's enquiries are treated as completed; but

(b) the officer may at any time before that day give effect to the claim or amendment, on a provisional basis, to such extent as he thinks fit. "

Power to enquire into claims

5 In paragraph 5 of that Schedule (power to enquire into claims), for sub-paragraphs (2) and (3) there shall be substituted the following sub-paragraphs--

" (2) The period referred to in sub-paragraph (1) above is whichever of the following ends the latest, namely--

(a) the period ending with the quarter day next following the first anniversary of the day on which the claim or amendment was made;

(b) where the claim or amendment relates to a year of assessment, the period ending with the first anniversary of the 31st January next following that year; and

(c) where the claim or amendment relates to a period other than a year of assessment, the period ending with the first anniversary of the end of that period;

and the quarter days for the purposes of this sub-paragraph are 31st January, 30th April, 31st July and 31st October.

(3) A claim or amendment which has been enquired into under sub-paragraph (1) above shall not be the subject of--

(a) a further notice under that sub-paragraph; or

(b) if it is subsequently included in a return, a notice under section 9A(1), 11AB(1) or 12AC(1) of this Act. "

Section 116(1).

SCHEDULE 21 Self-assessment etc: transitional provisions

Notice of liability

1 Section 7 of the Management Act (notice of liability) shall have effect as respects the year 1995-96 as if the reference in subsection (7) to a self-assessment made under section 9 of that Act in respect of that year were a reference to assessments made more than six months after the end of that year.

Payments on account of income tax

2 (1) Section 59A of that Act (payments on account of income tax) shall have effect as respects the year 1996-97 with the modifications made by sub-paragraphs (2) to (7) below.

(2) The references in subsections (1)(a) and (4A) to a person being assessed to income tax under section 9 of that Act shall be construed as references to his being assessed to income tax under section 29 of that Act.

(3) The reference in subsection (1)(b) to the assessed amount shall be construed as a reference to the difference between that amount and the aggregate of the following, namely--

(a) so much of any income tax charged at a higher rate on any income--

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

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

as is attributable to the difference between that rate and the basic rate; and

(b) so much of any income tax charged at a higher rate on any income chargeable under Schedule F as is attributable to the difference between that rate and the lower rate.

(4) The reference in subsection (1)(c) to the relevant amount shall be construed as a reference to the difference between that amount and the amount of any income tax charged under Schedule E which--

(a) has not been deducted under section 203 of the Taxes Act 1988; and

(b) is not charged by an assessment made under regulation 103 of the [S.I. 1993/744.] Income Tax (Employments) Regulations 1993.

(5) Subsection (2) shall have effect as if it required--

(a) the first payment on account to be of an amount equal to the aggregate of--

(i) such part of the relevant amount as represents tax charged under Schedule A or any of Cases III to VI of Schedule D; and

(ii) 50 per cent. of the remaining part of the relevant amount, and

(b) the second payment on account to be of an amount equal to 50 per cent. of that remaining part.

(6) Subsection (4) shall have effect as if it provided that, in the circumstances there mentioned--

(a) the amount of the first payment on account should be, and should be deemed always to have been, equal to the aggregate of--

(i) such part of the stated amount as represents tax charged under Schedule A or any of Cases III to VI of Schedule D; and

(ii) 50 per cent. of the remaining part of the stated amount, and

(b) the amount of the second payment on account should be, and should be deemed always to have been, equal to 50 per cent. of that remaining part.

(7) Subsection (4A) shall have effect as if it provided that, in the circumstances and subject as there mentioned--

(a) the amount of the first payment on account should be, and should be deemed always to have been, equal to the aggregate of--

(i) such part of the relevant amount (as determined on the basis of the assessment or, as the case may be, the assessment as amended) as represents tax charged under Schedule A or any of Cases III to VI of Schedule D; and

(ii) 50 per cent. of the remaining part of the relevant amount, as so determined, and

(b) the amount of the second payment on account should be, and should be deemed always to have been, equal to 50 per cent. of that remaining part.

(8) In this paragraph "higher rate" means a rate other than the basic rate or the lower rate.

Partnerships

3 (1) This paragraph applies in the case of a partnership whose trade, profession or business is set up and commenced before 6th April 1994.

(2) Section 32 of the Management Act (relief for double assessments to tax) shall have effect, as respects each partner and the year 1996-97, as if the partnership had not been assessed to income tax for that year.

(3) Section 59B of that Act (payment of income tax and capital gains tax) shall have effect, as respects each partner and that year, 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.

Section 123.

SCHEDULE 22 Prevention of exploitation of Schedule 20 to Finance Act 1994

Part I Cases I and II of Schedule D

Increase of profits or gains of transitional period

1 (1) This paragraph applies where, in the case of a trade, profession or vocation carried on by any person--

(a) paragraph 2(2) of Schedule 20 to the [1994 c. 9.] Finance Act 1994 applies without the modification made by paragraph 2(3) of that Schedule; and

(b) any amount which is included in the profits or gains of the transitional period would not have been so included if--

(i) any relevant change made by that person had not been made; or

(ii) any relevant transaction entered into by that person had not been entered into.

(2) Subject to sub-paragraph (3) below, the said paragraph 2(2) shall have effect as if the reference to the appropriate percentage of the aggregate of the amounts there mentioned were a reference to the aggregate of--

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