Finance Act 1995 (c. 4)

(The document as of February, 2008)

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(b) those parts shall be treated as two separate accounting periods; and

(4) In Schedule 28A--

(a) Part V shall have effect for identifying the amounts in issue for the accounting period being divided; and

(b) Part VI shall have effect for the purpose of apportioning those amounts to the parts of that accounting period.

(5) Subsections (6) to (8) of section 768B shall apply in relation to the relevant company as they apply in relation to the company mentioned in subsection (1) of that section except that any reference in those subsections to Part III of Schedule 28A shall be read as a reference to Part VI of that Schedule.

(6) Subsections (7) and (9) below apply only where, in accordance with the relevant provisions of the 1992 Act and Part VI of Schedule 28A, an amount is included in respect of chargeable gains in the total profits for the accounting period of the relevant company in which the relevant gain accrues.

(7) In computing the total profits of the relevant company for the accounting period in which the relevant gain accrues, no deduction shall be made under section 75 by reference to--

(a) sums disbursed or allowances falling to be made for an accounting period of the relevant company beginning before the change in ownership, or

(b) charges paid in such an accounting period,

from an amount of the total profits equal to the amount which represents the relevant gain.

(8) For the purposes of this section, the amount of the total profits for an accounting period which represents the relevant gain is--

(a) where the amount of the relevant gain does not exceed the amount which is included in respect of chargeable gains for that period, an amount equal to the amount of the relevant gain;

(b) where the amount of the relevant gain exceeds the amount which is included in respect of chargeable gains for that period, the amount so included.

(9) To the extent that a payment of interest made by the relevant company in the accounting period in which the relevant gain accrues represents excess overdue interest, the payment shall not be deductible under section 338(1) from such part of the total profits for that accounting period as represents the relevant gain.

(10) Whether a payment of interest made by the relevant company represents excess overdue interest, and if so to what extent, shall be determined in accordance with the provisions of Part IV of Schedule 28A.

(11) Subsections (8) and (9) of section 768 shall apply for the purposes of this section as they apply for the purposes of that section.

(12) In this section--

"the relevant provisions of the 1992 Act" means section 8(1) of and Schedule 7A to that Act; and
"investment company" has the same meaning as in Part IV. "

Supplementary provisions

3 After Schedule 28 there shall be inserted--

" Schedule 28A Change in ownership of investment company: deductions

Part I Significant increase in company capital

General

1 The provisions referred to in section 768B(2) for determining whether there is a significant increase in the amount of a company's capital after a change in the ownership of the company are as follows.

The basic rule

2 There is a significant increase in the amount of a company's capital if amount B--

(a) exceeds amount A by at least £1 million; or

(b) is at least twice amount A.

Amount A

3 (1) Amount A is the lower of--

(a) the amount of the company's capital immediately before the change in the ownership; and

(b) the highest 60 day minimum amount for the pre-change year, found in accordance with sub-paragraphs (2) to (6) below.

(2) Find the daily amounts of the company's capital over the pre-change year.

(3) Take the highest of the daily amounts.

(4) Find out whether there was in the pre-change year a period of 60 days or more in which there was no daily amount lower than the amount taken.

(5) If there was, the amount taken is the highest 60 day minimum amount for the pre-change year.

(6) If there was not, take the next highest of the daily amounts and repeat the process in sub-paragraph (4) above; and so on, until the highest 60 day minimum amount for the pre-change year is found.

(7) In this Part of this Schedule "the pre-change year" means the period of one year ending immediately before the change in the ownership of the company in question.

Amount B

4 (1) Amount B is the highest 60 day minimum amount for the post-change period (finding that amount for that period in the same way as the highest 60 day minimum amount for the pre-change year is found).

(2) In this paragraph "the post-change period" means the period of three years beginning with the change in the ownership of the company in question.

Capital and amounts of capital

5 (1) The capital of a company consists of the aggregate of--

(a) the amount of the paid up share capital of the company;

(b) the amount outstanding of any debts incurred by the company which are of a description mentioned in any of paragraphs (a) to (c) of section 417(7); and

(2) For the purposes of sub-paragraph (1) above--

(a) the amount of the paid up share capital includes any amount in the share premium account of the company (construing "share premium account" in the same way as in section 130 of the [1985 c. 6.] Companies Act 1985); and

(b) the amount outstanding of any debts includes any interest due on the debts.

(3) Amounts of capital shall be expressed in sterling and rounded up to the nearest pound.

Part II Amounts in issue for purposes of section 768B

6 The amounts in issue referred to in section 768B(4)(c) are--

(a) the amount of any sums (including commissions) actually disbursed as expenses of management for the accounting period being divided, except any such expenses as would (apart from section 768B) be deductible in computing profits otherwise than under section 75;

(b) the amount of any charges which are paid in that accounting period wholly and exclusively for the purposes of the company's business;

(d) the amount of any allowances falling to be made for that accounting period by virtue of section 28 of the 1990 Act which would (apart from section 768B) be added to the expenses of management for that accounting period by virtue of section 75(4);

(e) any other amounts by reference to which the profits or losses of that accounting period would (apart from section 768B) be calculated.

Part III Apportionment for purposes of section 768B

7 (1) Subject to paragraph 8 below, the apportionment required by section 768B(4)(c) shall be made--

(a) in the case of the sums and charges mentioned in paragraph 6(a) and (b) above, by reference to the time when the sum or charge is due to be paid;

(b) in the case of the excess mentioned in paragraph 6(c) above, by apportioning the whole amount of the excess to the first part of the accounting period being divided;

(c) in the case of the amounts mentioned in paragraph 6(d) and (e) above, by reference to the respective lengths of the parts of the accounting period being divided.

(2) For the purposes of sub-paragraph (1)(a) above, in the case of any charge consisting of interest, the interest shall be assumed to become due on a day to day basis as it arises.

8 If it appears that any method of apportionment given by paragraph 7 above would work unreasonably or unjustly for any case for which it is given, such other method shall be used for that case as appears just and reasonable.

Part IV Excess overdue interest

Introductory

9 (1) The provisions referred to in sections 768B(11) and 768C(10) for determining whether a payment of interest made by the company or, as the case may be, the relevant company represents excess overdue interest, and if so to what extent, are set out in paragraphs 10 to 12 below.

(2) In those paragraphs--

(a) "overdue interest" means interest due to be paid by the company or, as the case may be, the relevant company before the change in the ownership and still unpaid at the end of the actual accounting period in which the change occurs;

(b) "amount C" means the amount of all the overdue interest; and

(3) For the purposes of sub-paragraph (2) above--

(a) interest shall be assumed to become due on a day to day basis as it arises;

(b) the reference to the profits is a reference to the profits after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given against the profits, including deductions and reliefs which under any provision are treated as reducing them for those purposes.

The rules

10 (1) A payment of interest does not represent excess overdue interest except to the extent that it discharges a liability to pay overdue interest.

(2) For the purposes of this Part of this Schedule, a payment of interest on a debt shall be treated as discharging any liability to pay overdue interest before it is treated to any extent as discharging a liability to pay interest which is not overdue interest.

11 Where amount C does not exceed amount P, no payment of interest represents excess overdue interest.

12 (1) Where amount C exceeds amount P--

(a) find the amount by which amount C exceeds amount P (amount X);

(b) take all the payments and parts of payments which discharge any liability to pay overdue interest;

(2) A payment of interest represents excess overdue interest to the extent that, in accordance with sub-paragraph (1) above, it is treated as cancelling out amount X.

Part V Amounts in issue for purposes of section 768C

13 (1) The amounts in issue referred to in section 768C(3)(c) are--

(a) the amount which would in accordance with the relevant provisions of the 1992 Act (and apart from section 768C) be included in respect of chargeable gains in the total profits for the accounting period being divided;

(b) the amount of any sums (including commissions) actually disbursed as expenses of management for the accounting period being divided except any such expenses as would (apart from section 768C) be deductible in computing total profits otherwise than under section 75;

(c) the amount of any charges which are paid in that accounting period wholly and exclusively for the purposes of the company's business;

(d) the amount of any excess carried forward under section 75(3) to the accounting period being divided;

(e) the amount of any allowances falling to be made for that accounting period by virtue of section 28 of the 1990 Act which would (apart from section 768C) be added to the expenses of management for that accounting period by virtue of section 75(4); and

(f) any other amounts by reference to which the profits or losses of the accounting period being divided would (apart from section 768C) be calculated.

(2) In sub-paragraph (1)(a) above "the relevant provisions of the 1992 Act" means section 8(1) of and Schedule 7A to that Act.

Part VI Apportionment for purposes of section 768C

14 The apportionment required by section 768C(3)(c) shall be made as follows.

15 In the case of the amount mentioned in paragraph 13(1)(a) above--

(a) if it does not exceed the amount of the relevant gain, the whole of it shall be apportioned to the second part of the accounting period being divided;

(b) if it exceeds the amount of the relevant gain, the excess shall be apportioned to the first part of the accounting period being divided and the relevant gain shall be apportioned to the second part.

16 (1) Subject to paragraph 17 below, the apportionment shall be made--

(a) in the case of the sums and charges mentioned in paragraph 13(1)(b) and (c) above, by reference to the time when the sum or charge is due to be paid;

(b) in the case of the excess mentioned in paragraph 13(1)(d) above, by apportioning the whole amount of the excess to the first part of the accounting period being divided;

(c) in the case of the amounts mentioned in paragraph 13(1)(e) and (f) above, by reference to the respective lengths of the parts of the accounting period being divided.

(2) For the purposes of sub-paragraph (1)(a) above, in the case of any charge consisting of interest, the interest shall be assumed to become due on a day to day basis as it arises.

17 If it appears that any method of apportionment given by paragraph 16 above would work unreasonably or unjustly for any case for which it is given, such other method shall be used for that case as appears just and reasonable. "

Consequential amendments

4 (1) Section 769 (rules for ascertaining change in ownership of company) shall be amended in accordance with sub-paragraphs (2) to (4) below.

(2) In subsections (1), (2)(d) and (5) for "sections 767A, 768 and 768A" there shall in each case be substituted "sections 767A, 768, 768A, 768B and 768C".

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

" (3A) Subsection (3) above shall apply for the purposes of sections 768B and 768C as if the reference to the benefit of losses were a reference to the benefit of deductions. "

(4) In subsection (4) for "section 768 or 768A" there shall be substituted "section 768, 768A, 768B or 768C".

Application of Schedule

5 This Schedule shall apply in relation to a change in ownership occurring on or after 29th November 1994 other than a change occurring in pursuance of a contract entered into before that date.

Section 139.

SCHEDULE 27 Sub-contractors in the construction industry

Payments to which provision for deductions applies

1 (1) In subsection (1) of section 559 of the Taxes Act 1988 (payments from which deductions are made), for "subsection (2) below" there shall be substituted "subsections (2) and (3A) below".

(2) Subsection (3) of that section (limit on payments exempted where a guarantee has been given or the recipient is a school leaver) shall not apply in relation to payments made to a person in any case where that person's certificate under section 561 of that Act is one issued or renewed with respect to a period beginning on or after the appointed day.

(3) Before subsection (4) of that section there shall be inserted the following subsection--

" (3A) Subsection (1) above shall not apply to a payment made under any contract if such conditions as may be prescribed in regulations made by the Board are satisfied in relation to the payment and the person making it. "

(4) Sub-paragraphs (1) and (3) above shall have effect in relation to payments made on or after the appointed day.

Persons who are contractors and sub-contractors

2 (1) In subsection (2) of section 560 of that Act (persons who are contractors)--

(a) after paragraph (a) there shall be inserted the following paragraph--

" (aa) any public office or department of the Crown (including any Northern Ireland department); " ; and

(b) after paragraph (e) there shall be inserted the following paragraph--

" (ea) any such body, being a body (in addition to those falling within paragraphs (aa) to (e) above) which has been established for the purpose of carrying out functions conferred on it by or under any enactment, as may be designated as a body to which this subsection applies in regulations made by the Board; " .

(2) In paragraph (f) of that subsection and in subsection (3) of that section (persons to be contractors where average annual expenditure on construction exceeds £250,000), for "£250,000", wherever it occurs, there shall be substituted "£1,000,000".

(3) This paragraph applies in relation to any payments made on or after the appointed day.

Individual partners and liabilities for certain contraventions

3 (1) In subsection (2)(b) of section 561 of that Act (condition of certificate for a member of a firm), for "563" there shall be substituted "562".

(2) In subsection (10) of that section (offence in connection with obtaining certificate), for "on summary conviction to a fine not exceeding £5,000" there shall be substituted "to a penalty not exceeding £3,000".

(3) In subsection (11) of that section (offences in connection with certificates, vouchers etc.)--

(a) after "section 566(2)(j)" there shall be inserted "or who is in possession of any form or other document supplied to him by the Board for use in connection with any regulations under this Chapter"; and

(b) for "on summary conviction to a fine not exceeding £5,000" there shall be substituted "to a penalty not exceeding £3,000".

Turnover test etc.

4 (1) Section 562 of that Act (conditions for grant of exemption certificate to be satisfied by individuals) shall be amended as follows.

(2) In subsection (1) (applications to which section applies)--

(a) the words "(otherwise than as a partner in a firm)" shall be omitted; and

(b) at the end there shall be inserted "except that, where the application is for the issue of that certificate to that individual as a partner in a firm, this section shall have effect with the omission of subsections (2) to (2B)."

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

" (2A) The applicant must satisfy the Board, by such evidence as may be prescribed in regulations made by the Board, that the carrying on of the business mentioned in subsection (2) above is likely to involve the receipt, annually in the period to which the certificate would relate, of an aggregate amount by way of relevant payments which is not less than the amount specified in regulations made by the Board as the minimum turnover for the purposes of this subsection.

(2B) In subsection (2A) above "relevant payments" means the following payments, other than so much of them as would fall, as representing the direct cost to any person of any materials, to be disregarded in calculating the amount of any deductions under subsection (4) of section 559, that is to say--

(a) payments from which such deductions would fall to be made if the certificate is not granted; and

(b) payments which would be such payments but for any regulations under subsection (3A) of that section. "

(4) Subsections (3) to (7) (which relate to the period for which an individual has carried on his business) shall cease to have effect.

(5) In subsection (9) (compliance by companies of which the applicant has had control), for "has the meaning given by section 840" there shall be substituted "shall be construed in accordance with section 416(2) to (6)".

(6) In subsection (11) (persons who have been out of the United Kingdom), for the words from the beginning to the word "Board", in the second place where it occurs, there shall be substituted--

" (11) Where the applicant states, for the purpose of showing that he has complied with all obligations imposed on him as mentioned in subsection (8) above, that he was not subject to any of one or more obligations in respect of any period ending within the qualifying period--

(a) he must satisfy the Board of that fact by such evidence as may be prescribed in regulations made by the Board; and

(b) if for that purpose he states that he has been outside the United Kingdom for the whole or any part of the qualifying period, he must also satisfy them, by such evidence as may be so prescribed, " .

(7) For subsection (14) (meaning of "qualifying period") there shall be substituted the following subsections--

" (13A) Subject to subsection (10) above, a person shall not be taken for the purposes of this section to have complied with any such obligation or request as is referred to in subsections (8) to (11) above if there has been a contravention of a requirement as to the time at which, or the period within which, the obligation or request was to be complied with.

(14) In this section "the qualifying period", in relation to an application for the issue of a certificate under section 561, means the period of three years ending with the date of the application. "

5 Section 563 of that Act (conditions to be satisfied by individuals who are partners) shall cease to have effect.

6 For subsections (3) to (5) of section 564 of that Act there shall be substituted the following subsections--

" (2A) The partners must satisfy the Board, by such evidence as may be prescribed in regulations made by the Board, that the carrying on of the firm's business is likely to involve the receipt, annually in the period to which the certificate would relate, of an aggregate amount by way of relevant payments which is not less than whichever is the smaller of--

(a) the sum specified in subsection (2B) below; and

(b) the amount specified for the purposes of this paragraph in regulations made by the Board;

and in this subsection "relevant payments" has the meaning given by section 562(2B).

(2B) The sum referred to in subsection (2A)(a) above is the sum of the following amounts, that is to say--

(a) the amount obtained by multiplying the number of partners in the firm who are individuals by the amount specified in regulations as the minimum turnover for the purposes of section 562(2A); and

(b) in respect of each partner in the firm who is a company (other than one to which section 565(2A)(b) would apply), the amount equal to what would have been the minimum turnover for the purposes of section 565(2A) if the application had been for the issue of a certificate to that company.

(3) Subject to subsection (4) below, each of the persons who are partners at the time of the application must have complied, so far as any such charge to income tax or corporation tax is concerned as falls to be computed by reference to the profits or gains of the firm's business--

(a) with all obligations imposed on him by or under the Tax Acts or the Management Act in respect of periods ending within the qualifying period; and

(b) with all requests to him as such a partner to supply to an inspector accounts of, or other information about, the firm's business or his share of the profits or gains of that business.

(4) Where a person has failed to comply with such an obligation or request as is referred to in subsection (3) above the firm shall nevertheless be treated, in relation to that partner, as satisfying that condition as regards that obligation or request if the Board are of the opinion that the failure is minor and technical and does not give reason to doubt that the condition mentioned in subsection (5) below will be satisfied.

(5) There must be reason to expect that each of the persons who are from time to time partners in the firm will, in respect of periods ending after the end of the qualifying period, comply with such obligations and requests as are referred to in subsection (3) above.

(6) Subject to subsection (4) above, a person shall not be taken for the purposes of this section to have complied with any such obligation or request as is referred to in subsection (3) above if there has been a contravention of a requirement as to the time at which, or the period within which, the obligation or request was to be complied with.

(7) In this section "the qualifying period", in relation to an application for the issue of a certificate under section 561, means the period of three years ending with the date of the application. "

7 (1) After subsection (2) of section 565 of that Act there shall be inserted the following subsections--

" (2A) The company must either--

(a) satisfy the Board, by such evidence as may be prescribed in regulations made by them, that the carrying on of its business is likely to involve the receipt, annually in the period to which the certificate would relate, of an aggregate amount by way of relevant payments which is not less than the amount which is the minimum turnover for the purposes of this subsection; or

(b) satisfy the Board that the only persons with shares in the company are companies which are limited by shares and themselves excepted from section 559 by virtue of a certificate which is in force under section 561;

and in this subsection "relevant payments" has the meaning given by section 562(2B).

(2B) The minimum turnover for the purposes of subsection (2A) above is whichever is the smaller of--

(a) the amount obtained by multiplying the amount specified in regulations as the minimum turnover for the purposes of section 562(2A) by the number of persons who are relevant persons in relation to the company; and

(b) the amount specified for the purposes of this paragraph in regulations made by the Board.

(2C) For the purposes of subsection (2B) above a person is a relevant person in relation to the company--

(a) where the company is a close company, if he is a director of the company (within the meaning of Chapter II of Part V) or a beneficial owner of shares in the company; and

(b) in any other case, if he is such a director of the company. "

(2) After subsection (8) of that section there shall be inserted the following subsection--

" (8A) Subject to subsection (4) above, a company shall not be taken for the purposes of this section to have complied with any such obligation or request as is referred to in subsections (3) to (7) above if there has been a contravention of a requirement as to the time at which, or the period within which, the obligation or request was to be complied with. "

Commencement of paragraphs 3 to 7

8 (1) Except in the case of paragraph 3(2) and (3) above, paragraphs 3 to 7 above shall have effect in relation to any application for the issue or renewal of a certificate under section 561 of the Taxes Act 1988 which is made with respect to any period beginning on or after the appointed day.

(2) Paragraph 3(2) and (3)(b) above shall have effect in relation to contraventions of section 561(10) or (11) occurring on or after the appointed day; and paragraph 3(3)(a) above shall have effect in relation to forms and other documents in a person's possession at any time after the passing of this Act.

Powers to make regulations

9 In section 566 of that Act (general powers to make regulations), after subsection (2) there shall be inserted the following subsection--

" (3) Any power under this Chapter to make regulations prescribing the evidence required for establishing what is likely to happen at any time shall include power to provide for such matters to be presumed (whether conclusively or unless the contrary is shown in the manner provided for in the regulations) from evidence of what has previously happened. "

Section 153.

SCHEDULE 28 Electronic lodgement of tax returns, etc.

1 In the [1970 c. 9.] Taxes Management Act 1970 after section 115 there shall be inserted--

" 115A Electronic lodgement of tax returns, etc.

Schedule 3A to this Act (which makes provision with respect to the electronic lodgement of tax returns and documents required in connection with tax returns) shall have effect. "

2 After Schedule 3 to that Act there shall be inserted--

" Schedule 3A Electronic lodgement of tax returns, etc.

Part I Tax returns: general

The basic rule

1 (1) Sub-paragraph (2) below applies where a person is--

(a) required by a notice to which this Schedule applies, or

(b) subject to any other requirement to which this Schedule applies,

to deliver or make a return to an officer of the Board or to the Board.

(2) The requirement to deliver or make the return shall be treated as fulfilled by the person subject to the requirement if--

(a) information is transmitted electronically in response to that requirement; and

(b) each of the conditions in Part III of this Schedule is met with respect to that transmission.

(3) Sub-paragraphs (4) and (5) below apply where the requirement to deliver or make the return is fulfilled by virtue of sub-paragraph (2) above.

(4) Any requirement--

(a) under any provision of Part II of this Act that the return include a declaration by the person making the return to the effect that the return is to the best of his knowledge correct and complete, or

(b) under or by virtue of any other provision of the Taxes Acts that the return be signed or include any description of declaration or certificate,

shall not apply.

(5) The time at which the requirement to deliver or make the return is fulfilled is the end of the day during which the last of the conditions in Part III of this Schedule to be met with respect to the transmission is met.

(6) In sub-paragraph (2)(a) above "information" includes any self-assessment, partnership statement, particulars or claim.

Returns to which Schedule applies

2 (1) This Schedule applies to a notice requiring a return to be delivered or made if--

(a) the notice is given under any provision of the Taxes Acts or of regulations made under the Taxes Acts;

(b) the provision is specified for the purposes of this Schedule by an order made by the Treasury; and

(2) This Schedule applies to any other requirement to deliver or make a return if--

(a) the requirement is imposed by any provision of the Taxes Acts or of regulations made under the Taxes Acts;

(b) the provision is specified for the purposes of this Schedule by an order made by the Treasury; and

(c) the requirement is required to be fulfilled within a period beginning after the day appointed by the order in relation to the specified provision.

(3) The power to make an order under this paragraph shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.

(4) For the purposes of this Schedule, any reference to a requirement to deliver a return includes, in relation to regulations made under the principal Act, a reference to a requirement to render a return.

Part II Documents supporting certain tax returns

3 (1) This paragraph applies where--

(a) a person is required by a notice to which this Schedule applies to deliver a return to an officer of the Board;

(b) the notice also requires any document other than the return ("a supporting document") to be delivered;

(d) the notice states that the supporting document may be transmitted electronically; and

(e) the requirement to deliver the return is fulfilled by virtue of paragraph 1(2) of this Schedule.

(2) The requirement to deliver the supporting document shall be treated as fulfilled by the person subject to the requirement if--

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