Income and Corporation Taxes Act 1988 (c. 1)

(The document as of February, 2008)

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Relief by reduction of tax

4 (1) Subject to sub-paragraph (2) below, in the case of any payment in respect of which tax is chargeable under section 148, the following relief shall be allowed by way of deduction from the tax chargeable by virtue of that section, that is to say, there shall be ascertained--

(a) the amount of tax which would be chargeable apart from this paragraph in respect of the income of the holder or past holder of the office or employment for the chargeable period of which the payment is treated as income;

(b) the amount of tax which would have been so chargeable if the payment had not been made;

and the amount to be deducted shall be half the difference between the amount ascertained at (a) and the amount ascertained at (b).

(2) In the case of a payment which exceeds £50,000, this paragraph applies as if it were a payment of £50,000 exactly.

5 (1) Subject to sub-paragraph (2) below, in the case of a payment which exceeds £50,000 and in respect of which tax is chargeable under section 148, the following relief shall be allowed by way of deduction from the tax chargeable by virtue of that section, that is to say, there shall be ascertained--

(a) the amount of tax which would be chargeable apart from this paragraph and paragraph 4 above in respect of the income of the holder or past holder of the office or employment for the chargeable period of which the payment is treated as income; and

(b) the amount of tax which would have been so chargeable if the amount of the payment had been £50,000 exactly;

and the amount to be deducted shall be one-quarter of the difference between the amount ascertained at (a) and the amount ascertained at (b).

(2) In the case of a payment which exceeds £75,000, this paragraph applies as if it were a payment of £75,000 exactly.

(3) Any relief allowed by virtue of this paragraph shall be in addition to that allowed by virtue of paragraph 4 above.

6 Where tax is chargeable under section 148 in respect of two or more payments to or in respect of the same person in respect of the same office or employment and is so chargeable for the same chargeable period, those payments shall be treated for the purposes of paragraphs 4 and 5 above as a single payment of an amount equal to their aggregate amount.

7 Where tax is chargeable under section 148 in respect of two or more payments to or in respect of the same person in respect of different offices or employments and is so chargeable for the same chargeable period, paragraphs 4 to 6 above shall apply as if those payments were made in respect of the same office or employment.

Supplemental

8 Any reference in this Schedule to the emoluments of an office or employment is a reference to those emoluments exclusive of any payment chargeable to tax under section 148; and in calculating for any purpose of this Schedule the amount of such emoluments--

(a) there shall be included any balancing charge to which the holder of the office or employment is liable under section 33 of the 1968 Act or under Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 ("the 1971 Act"), and

(b) there shall be deducted any allowances under Chapter II of Part I of the 1968 Act or Chapter I of Part III of the 1971 Act, and any allowances for expenses under section 198 or 201, to which he is entitled,

and any such charges or allowances for a chargeable period shall, for the purpose of ascertaining the amount of the emoluments for any year of service, be treated as accruing from day to day, and shall be apportioned in respect of time accordingly.

9 In this Schedule "the relevant date" means, in relation to a payment not being a payment in commutation of annual or other periodical payments, the date of the termination or change in respect of which it is made and, in relation to a payment in commutation of annual or other periodical payments, the date of the termination or change in respect of which those payments would have been made.

10 In this Schedule, "foreign service", in relation to an office or employment, means--

(a) service before the year 1974-75 such that tax was not chargeable in respect of the emoluments of the office or employment--

(i) in the case of the year 1956-57 or any subsequent chargeable period, under Case I of Schedule E;

(ii) in the case of any preceding year of assessment, under Schedule E; or

(b) service after the year 1973-74 such that the emoluments from the office or employment were not chargeable under Case I of Schedule E (or would not have been so chargeable, had there been any) or that a deduction equal to their whole amount was or would have been allowable under paragraph 1 of Schedule 2 to the [1974 c. 30.] Finance Act 1974, paragraph 1 of Schedule 7 to the [1977 c. 36.] Finance Act 1977 or section 193(1) in charging them.

11 Any reference in this Schedule to the amount of tax to which a person is or would be chargeable is a reference to the amount of tax to which he is or would be chargeable either by assessment or by deduction.

PART II PAYMENTS IN PURSUANCE OF PRE-10th MARCH 1981 OBLIGATIONS

12 Where a payment is made in pursuance of an obligation incurred before 10th March 1981, the person chargeable to tax in respect of it may, by notice given to the inspector within six years after the year of assessment in which the payment is made, elect that Part I of this Schedule shall have effect in relation to the payment subject to the modifications contained in the following provisions of this Part, and those provisions shall have effect accordingly (and not otherwise).

13 The following paragraphs shall be inserted immediately before paragraph 3--

" 2A In computing the charge to tax in respect of a payment chargeable to tax under section 148, not being a payment of compensation for loss of office, there shall be deducted from the payment a sum equal to the amount (if any) by which the standard capital superannuation benefit for the office or employment in respect of which the payment is made exceeds £10,000.

2B (1) In this Schedule "the standard capital superannuation benefit", in relation to an office or employment, means a sum arrived at as follows, that is to say--

(a) there shall be ascertained the average for one year of the holder's emoluments from the office or employment for the last three years of his service before the relevant date (or for the whole period of his service if less than three years);

(b) one-twentieth of the amount ascertained at (a) shall be multiplied by the whole number of complete years of the service of the holder in the office or employment; and

(c) there shall be deducted from the product at (b) a sum equal to the amount, or, as the case may be, to the value at the relevant date, of any lump sum (not chargeable to tax) received or receivable by the holder in respect of the office or employment in pursuance of any such scheme or fund as was described in section 221(1) and (2) of the 1970 Act or is described in section 596.

(2) In sub-paragraph (1)(c) above the reference to a lump sum receivable by the holder includes a reference to a lump sum that would be receivable by him if he had exercised or refrained from exercising (with any necessary consent) any option or other right conferred on him by the rules of the scheme or fund.

2C Where tax is chargeable under section 148 in respect of two or more payments to which paragraph 2A above applies, being payments made to or in respect of the same person in respect of the same office or employment or in respect of different offices or employments held under the same employer or under associated employers, then--

(a) paragraph 2A above shall apply as if those payments were a single payment of an amount equal to their aggregate amount and, where they are made in respect of different offices or employments, as if the standard capital superannuation benefit were an amount equal to the sum of the standard capital superannuation benefits for those offices or employments, and

(b) where the payments are treated as income of different chargeable periods, the relief to be granted under that paragraph in respect of a payment chargeable for any such period shall be the amount by which the relief computed in accordance with the preceding provision in respect of that payment and any payments chargeable for previous chargeable periods exceeds the relief in respect of the last mentioned payments;

and where the standard capital superannuation benefit for an office or employment in respect of which two or more of the payments are made is not the same in relation to each of those payments, it shall be treated for the purpose of this paragraph as equal to the higher or highest of those benefits. "

14 In paragraph 3, after the words "from the payment" there shall be inserted the words "(in addition to any deduction allowed under the preceding provisions of this Schedule)".

15 In paragraph 4(1), for the words following sub-pargraph (b) there shall be substituted the following words--

" (c) the difference between the respective amounts of tax which would be so chargeable on the assumptions--

(i) that the appropriate fraction only of the payment (after deducting any relief applicable thereto under the preceding provisions of this Schedule) had been made, and

(ii) that no part of the payment had been made,

and disregarding, in each case, any other emoluments of the office or employment,

and the amount to be deducted shall be the difference between the amount ascertained at (a) and the sum of the amount ascertained at (b) and the appropriate multiple of the difference ascertained at (c). "

16 The following paragraphs shall be inserted after paragraph 5--

" 5A (1) Where the income of the holder or past holder of the office or employment for the chargeable period of which the payment is treated as income includes income, income tax on which he is entitled to charge against any other person, or to deduct, retain or satisfy out of any payment which he is liable to make to any other person, the amounts referred to in sub-paragraphs (a) to (c) of paragraph 4 above shall be calculated as if that tax were not chargeable in respect of that income.

(2) Where for any year of assessment an individual claims relief under paragraph 4 above, and also under section 550 or Schedule 2, or under both that section and that Schedule, then, in computing the relief under paragraph 4 above, his income shall be deemed to include--

(a) in respect of any amount which would otherwise be included therein by virtue of section 547(1)(a), no greater amount than the appropriate fraction thereof within the meaning of section 550, and

(b) in respect of any chargeable sum within the meaning of Schedule 2 (including two or more sums treated for the purposes of paragraph 3 of that Schedule as one chargeable sum), no greater amount than the balance (if any) of the yearly equivalent thereof remaining after the making of any deduction required by that paragraph.

5B In this Schedule "the appropriate fraction" (except in paragraph 5A(2)(a)) and "the appropriate multiple", in relation to any payment, mean respectively--

(a) where the payment is not a payment of compensation for loss of office, one-sixth and six, and

(b) where the payment is a payment of compensation for loss of office, one divided by the relevant number of years of unexpired service, and that number of years,

and for the purposes of this paragraph "the relevant number of years of unexpired service" means the number of complete years taken into account in calculating the amount of the payment, being years for which the holder of the office or employment would have been entitled (otherwise than by virtue of arrangements made in contemplation of his retirement or removal or of any relevant change in the functions or emoluments of the office or employment) to retain the office or employment or its full emoluments, and where the period so taken into account is less than one complete year or exceeds an exact number of years, it shall be treated for the purposes of this paragraph as one complete year or as the next higher number of complete years, as the case may be. "

17 The following proviso shall be added at the end of paragraph 6--

" Provided that, where the appropriate fraction and the appropriate multiple are not the same for each of the payments, the calculations of relief under paragraph 4 above shall be made separately in relation to each payment or payments having a different appropriate fraction and multiple, and in any such calculation--

(a) any payment for which the appropriate multiple is lower shall be left out of account for all the purposes of that paragraph, and

(b) in ascertaining the difference at (c) of that paragraph it shall be assumed that the appropriate fraction only of any payment for which the appropriate multiple is higher had been made,

and the relief to be allowed shall be the sum of the reliefs so calculated in respect of the payments respectively. "

18 The following words shall be added at the end of paragraph 7--

" and as if any emoluments of any of those offices or employments were emoluments of the same office or employment. "

19 The following paragraph shall be inserted after paragraph 8--

" 8A In this Schedule "payment of compensation for loss of office" means a payment made--

(a) in pursuance of an order of a court in proceedings for wrongful dismissal or otherwise for breach of contract of employment, or by way of settlement of such proceedings or of a claim in respect of which such proceedings could have been brought, or

(b) by way of compensation for the extinguishment of any right the infringement of which would be actionable in such proceedings,

and any question whether, and to what extent, a payment is or is not a payment of compensation for loss of office shall be determined according to all the circumstances and not (or not exclusively) by reference to the terms on which it is expressed to be made. "

Section 193.

SCHEDULE 12 FOREIGN EARNINGS

1 This Schedule shall have effect for the purpose of supplementing the provisions of section 193(1).

Emoluments eligible for relief

2 (1) This paragraph has effect where a deduction falls to be allowed under section 193(1) in respect of the emoluments from an employment ("the relevant employment") for a year of assessment in which the duties of--

(a) the relevant employment; or

(b) any other employment or employments held by the person concerned which are associated with the relevant employment,

are not performed wholly outside the United Kingdom.

(2) The amount of the emoluments from the relevant employment in respect of which such a deduction is allowed for the year of assessment shall not exceed such proportion of the emoluments for that year from the relevant employment and the other employment or employments (if any) as is shown to be reasonable having regard to the nature of and time devoted to the duties performed outside and in the United Kingdom respectively and to all other relevant circumstances.

(3) For the purposes of this paragraph an employment is associated with another if they are with the same person or with persons associated with each other and--

(a) a company is associated with another company if one of them has control of the other within the meaning of section 416 or both of them are under the control within the meaning of that section of the same person or persons,

(b) an individual or partnership is associated with another person (whether or not a company) if one of them has control of the other within the meaning of section 840 or both are under the control within the meaning of that section of the same person or persons;

but paragraph (b) above shall not be construed as requiring an individual to be treated in any circumstances as under the control of another person.

Qualifying periods

3 (1) For the purposes of section 193(1) a qualifying period is a period of consecutive days which either--

(a) consists entirely of days of absence from the United Kingdom; or

(b) consists partly of such days and partly of days included by virtue of sub-paragraph (2) below.

(2) Where, in the case of any person, a period consisting entirely of days of absence from the United Kingdom ("the relevant period") comes to an end and there have previously been one or more qualifying periods, the relevant period and the (or, if more than one, the last) qualifying period together with the intervening days between those periods shall be treated as a single qualifying period provided that--

(a) there are no more than 62 intervening days, and

(b) the number of days in the resulting period which are not days of absence from the United Kingdom does not exceed one-sixth of the total number of days in that period.

(3) For the purposes of section 193(1) the emoluments from an employment attributable to a qualifying period include any emoluments from that employment for a period of leave immediately following that period but not so as to make any emoluments for one year of assessment emoluments for another.

Supplementary

4 For the purposes of this Schedule a person shall not be regarded as absent from the United Kingdom on any day unless he is so absent at the end of it.

5 Notwithstanding section 132(4)(b), there shall be treated for the purposes of section 193(1) and this Schedule as performed outside the United Kingdom any duties which a person performs on a vessel or aircraft engaged on--

(a) a voyage or journey beginning or ending outside the United Kingdom (but exclusive of any part of it which begins and ends in the United Kingdom); or

(b) any part beginning or ending outside the United Kingdom of a voyage or journey which begins and ends in the United Kingdom;

and for the purposes of this paragraph any area designated under section 1(7) of the [1964 c. 29.] Continental Shelf Act 1964 shall be treated as part of the United Kingdom.

6 Where an employment is in substance one the duties of which fall in the year of assessment to be performed in the United Kingdom, then, for the purposes of section 193(1), there shall be treated as so performed any duties performed outside the United Kingdom the performance of which is merely incidental to the performance of other duties in the United Kingdom.

7 In this Schedule references to an employment include references to an office.

Section 238(5), 241(4).

SCHEDULE 13 COLLECTION OF ADVANCE CORPORATION TAX

Duty to make returns

1 (1) A company shall for each of its accounting periods make, in accordance with this Schedule, returns to the collector of the franked payments made and franked investment income received by it in that period and of the advance corporation tax (if any) payable by it in respect of those payments.

(2) A return shall be made for--

(a) each complete quarter falling within the accounting period, that is to say, each of the periods of three months ending with 31st March, 30th June, 30th September or 31st December which falls within that period:

(b) each part of the accounting period which is not a complete quarter and ends on the first (or only), or begins immediately after the last (or only), of those dates which falls within the accounting period;

(3) A return for any period for which a return is required to be made under this paragraph ("a return period") shall be made within 14 days from the end of that period.

(4) Subject to paragraphs 4(2) and 7(3) below, no return need be made under this Schedule by a company for any period in which it has made no franked payments.

Contents of return

2 (1) Subject to paragraph 7(2) below, the return made by a company for any return period shall show--

(a) the amount of the franked payments made by it in that period;

(b) the amount of franked investment income, if any, received by it in that period, and

(2) The return shall specify whether any amount of franked payments is included under paragraph (a) of sub-paragraph (1) above in consequence of the giving of a notice under section 247(3) and, if so, the amount so included.

(3) For the purposes of paragraph (b) of sub-paragraph (1) above the amount of franked investment income received by a company in a return period shall be treated as including the excess, if any, of--

(a) any surplus of franked investment income carried forward to the accounting period for which the return is made; and

(b) any amount of franked investment income received by the company in that accounting period but before the beginning of the return period,

over the amount of any franked payments made by the company in that accounting period but before the beginning of the return period.

(4) For the purposes of paragraph (c) of sub-paragraph (1) above advance corporation tax shall be payable in respect of franked payments made in a return period if--

(a) the amount shown under paragraph (a) of that sub-paragraph exceeds the amount shown under paragraph (b) of that sub-paragraph, or

(b) no amount is shown under paragraph (b) of that sub-paragraph;

and the amount of that tax shall be calculated at the rate of advance corporation tax in force for the financial year in which the return period ends on an amount which, when that tax is added to it, is equal to that excess or, if no amount is shown under sub-paragraph (1)(b) above, to the amount shown under sub-paragraph (1)(a) above.

Payment of tax

3 (1) Subject to paragraph 7(2) below, advance corporation tax in respect of franked payments required to be included in a return under this Schedule shall be due at the time by which the return for that period is to be made, and advance corporation tax so due shall be payable without the making of any assessment.

(2) Advance corporation tax which has become so due may be assessed on the company (whether or not it has been paid when the assessment is made) if that tax, or any part of it, is not paid on or before the due date.

(3) If it appears to the inspector that there is a franked payment which ought to have been and has not been included in a return, or if the inspector is dissatisfied with any return, he may make an assessment on the company to the best of his judgment; and any advance corporation tax due under an assessment made by virtue of this sub-paragraph shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if a correct return had been made.

Receipt of franked investment income after payment of advance corporation tax

4 (1) This paragraph shall have effect where--

(a) a return has been made of franked payments made in any return period falling within an accounting period and advance corporation tax has been paid in respect of those payments; and

(b) the company receives franked investment income after the end of the return period but before the end of the accounting period.

(2) The company shall make a return under paragraph 1 above for the return period in which the franked investment income is received whether or not it has made any franked payments in that period, and, subject to sub-paragraph (3) below, shall be entitled to repayment of any advance corporation tax paid (and not repaid) in respect of franked payments made in the accounting period in question.

(3) If no franked payments were made by the company in the return period for which a return is made by virtue of sub-paragraph (2) above the amount of the repayment shall not exceed the amount of the tax credit comprised in the franked investment income received; and in any other case the repayment shall not exceed the amount of the tax credit comprised in so much of that franked investment income, if any, as exceeds the amount of the franked payments made in that return period.

Claims for set-off in respect of franked investment income received by a company

5 Where under paragraph 2 or 4 above franked investment income received by a company falls to be taken into account in determining--

(a) whether advance corporation tax is payable or repayable; or

(b) the amount of such tax which is payable or repayable,

the inclusion of that franked investment income in the appropriate return shall be treated as a claim by the company to have it so taken into account, and any such claim shall be supported by such evidence as the inspector may reasonably require.

6 (1) Where a claim has been made under paragraph 5 above no proceedings for collecting tax which would fall to be discharged if the claim were allowed shall be instituted pending the final determination of the claim, but this sub-paragraph shall not affect the date when the tax is due.

(2) When the claim is finally determined any tax underpaid in consequence of sub-paragraph (1) above shall be paid.

(3) Where proceedings are instituted for collecting tax assessed, or interest on tax assessed, under any provision of this Schedule, effect shall not be given to any claim made after the institution of the proceedings so as to affect or delay the collection or recovery of the tax charged by the assessment or of interest thereon, until the claim has been finally determined.

(4) When the claim is finally determined any tax overpaid in consequence of sub-paragraph (3) above shall be repaid.

(5) References in this paragraph to proceedings for the collection of tax include references to proceedings by way of distraint or poinding for tax.

Qualifying distributions which are not payments and payments of uncertain nature

7 (1) This paragraph applies to--

(a) any qualifying distribution which is not a payment; and

(b) any payment in respect of which the company making it would be liable to pay advance corporation tax if, but only if, it amounted to or involved a qualifying distribution and it is not in the circumstances clear whether or how far it does so.

(2) No amount shall be shown in respect of the qualifying distribution or payment under paragraph 2(1)(a) or (c) above and paragraph 3(1) above shall not apply to the payment of advance corporation tax in respect thereof.

(3) Particulars of the qualifying distribution or payment shall be given separately in the return for the return period in which it is made and if, apart from that distribution or payment, no franked payment is made in that period, a return containing those particulars shall be made for that period under paragraph 1 above.

(4) Any advance corporation tax payable in respect of the qualifying distribution or payment shall be assessed on the company and shall be so assessed without regard to any franked investment income received by the company but--

(a) relief shall be given from the tax assessed (by discharge thereof) to the extent, if any, to which that tax exceeds the tax that would have been payable if the amount of the franked payment comprising the qualifying distribution or payment, calculated on the amount or value thereof shown in the assessment, had been included in the return under sub-paragraph (1)(a) of paragraph 2 above and the tax had been calculated in accordance with sub-paragraph (4) of that paragraph; and

(b) for the purposes of the application of sub-paragraph (3) of that paragraph to any subsequent return period, the amount of that franked payment shall be taken to be the amount so calculated.

Items included in error

8 Where any item has been included in a return under this Schedule as a franked payment made or as franked investment income received by a company but that item should have been included in a return or claim under Schedule 16, the inspector may make any such assessments, adjustments or set-offs as may be required for securing that the resulting liabilities to tax (including interest on unpaid tax) whether of the company or of any other person are the same as they would have been if the item had been included in the right return or claim.

Qualifying distribution made otherwise than in an accounting period

9 Where a company makes a qualifying distribution on a date which does not fall within an accounting period the company shall make a return of that distribution within 14 days from that date, and the advance corporation tax in respect thereof shall be due at the time by which the return is to be made, except where the distribution is not a payment in which case the advance corporation tax shall be assessed on the company.

Assessments and due date of tax

10 (1) All the provisions of the Corporation Tax Acts as to the time within which an assessment may be made, so far as they refer or relate to the accounting period for which an assessment is made, or the accounting period to which an assessment relates, shall apply in relation to an assessment under this Schedule notwithstanding that, under this Schedule, the assessment may be said to relate to a quarter or other period which is not an accounting period; and the provisions of sections 36 and 39 of the Management Act as to the circumstances in which an assessment may be made out of time shall apply accordingly on the footing that any such assessment relates to the accounting period in which the quarter or other period ends or, in the case of an assessment under paragraph 9 above, to an accounting period ending on the date on which the distribution is made.

(2) Advance corporation tax assessed on a company under this Schedule shall be due within 14 days after the issue of the notice of assessment (unless due earlier under paragraph 3(1) or 9 above).

(3) Sub-paragraph (2) above has effect subject to any appeal against the assessment, but no such appeal shall affect the date when tax is due under paragraph 3(1) or 9 above.

(4) On the determination of an appeal against an assessment under this Schedule any tax overpaid shall be repaid.

(5) Any tax assessable under any one or more of the provisions of this Schedule may be included in one assessment if the tax so included is all due on the same date.

Section 266(12).

SCHEDULE 14 PROVISIONS ANCILLARY TO SECTION 266

PART I MODIFICATION OF SECTION 266 IN CERTAIN CASES

Husband and wife

1 (1) The references in section 266 to an individual's spouse shall include any person who was that individual's spouse at the time the insurance or contract was made, unless the marriage was dissolved before 6th April 1979.

(2) Where an election under section 287 is in force, the relief to which either the husband or the wife is entitled under section 266 in respect of an insurance or contract on the life of the other or made by the other shall not be affected by section 287(4), (5) or (6).

(3) Where throughout a year of assessment a woman is a married woman living with her husband, then--

(a) if no election under section 283 is in force, section 274 and paragraph 6 below shall apply as if any relief to which the wife is entitled under section 266 were relief to which the husband is entitled; and

(b) if such an election is in force, section 274 and paragraph 6 below shall apply separately to the amounts paid by each of them, but as if for the limit specified in that section there were substituted, in relation to each of them, a limit of £750 or one-twelfth of their total income, whichever is the greater, plus any amount by which the payments in respect of which relief can be given to the other fall short of the limit so substituted.

Premiums payable to friendly societies and industrial assurance companies

2 (1) This paragraph applies to--

(a) a policy issued in the course of an industrial assurance business; and

(b) a policy issued by a registered friendly society in the course of tax exempt life or endowment business (as defined in section 466).

(2) Subject to paragraph 3(2) below, if a policy to which this paragraph applies was issued before the passing of the [1976 c. 40.] Finance Act 1976 (29th July 1976), section 266 shall have effect in relation to it as if subsections (2)(b), (3)(a), (b) and (d) were omitted; and if a policy to which this paragraph applies was issued after the passing of that Act, subsection (2)(b) of that section shall have effect in relation to it as if it permitted the insurance to be on the life of the individual's parent or grandparent or, subject to sub-paragraph (3) below, on the life of the individual's child or grandchild.

(3) Relief may be given in respect of premiums under a policy of insurance on the life of an individual's child or grandchild which was or is issued after the passing of the [1976 c. 40.] Finance Act 1976 (29th July 1976), as if subsection (3)(d) of section 266 were omitted, but may be given only if the annual amount of the premiums, together with that of any relevant premiums, does not exceed £52 if the policy was issued in respect of an insurance made before 25th March 1982 or £64 in any other case.

(4) For the purposes of sub-paragraph (3) above, a relevant premium, in relation to an insurance made at any time on the life of an individual's child or grandchild, is any premium under a policy of insurance on the same life, where the insurance is made at the same time or earlier, whether it is made by the individual or any other person.

(5) In this paragraph "child" includes a step-child and an illegitimate child whose parents have married each other after his birth, and "grandchild", "parent" and "grandparent" have corresponding meanings.

3 (1) Where a policy is issued or a contract is made by a registered friendly society or a policy to which paragraph 2 above applies is issued by an industrial assurance company, section 266(4), (5) and (8) shall apply in relation to premiums payable under the policy or contract subject to the following provisions of this paragraph.

(2) References to the deductions authorised under section 266(5) shall be construed as including references to any amount retained by or refunded to the person paying the premium under any scheme made by the society or company in accordance with regulations made under this paragraph.

(3) The appropriate authority may make regulations authorising--

(a) the adoption by registered friendly societies and industrial assurance companies of any prescribed scheme for securing that in the case of policies or contracts to which the scheme applies amounts equal to 15 per cent. of the premiums payable are retained by or refunded to the person paying the premiums or that, in the case of such policies or contracts issued or made before 6th April 1979, the amounts expressed as the amounts of the premiums payable are treated as amounts arrived at by deducting 15 per cent. from the amounts payable and that the amounts of the capital sums assured or guaranteed are treated as correspondingly increased; or

(b) the adoption by any such society or company of any special scheme for that purpose which may, in such circumstances as may be prescribed, be approved by the appropriate authority.

(4) Increases treated as made in pursuance of regulations under this paragraph shall not be treated as variations of a policy or contract and shall be disregarded for the purposes of paragraph 2(3) above, sections 268(6), 460, 461(1) and 464 of, and paragraph 7 of Schedule 15 to, this Act and section 100 of the [1891 c. 39.] Stamp Act 1891 and the heading "Policy of Life Insurance" in Schedule 1 to that Act.

(5) The regulations may include such adaptations and modifications of the enactments relating to friendly societies or industrial assurance companies and such other incidental and supplementary provisions as appear to the appropriate authority necessary or expedient for the purpose of enabling such societies or companies to adopt the schemes authorised by the regulations.

(6) Subsections (4), (5) and (7) to (11) of section 6 of the [1969 c. 19.] Decimal Currency Act 1969 shall, with the necessary modifications, apply in relation to regulations made under this paragraph.

PART II SUPPLEMENTARY PROVISIONS AS TO RELIEF UNDER SECTION 266

4 (1) Where it appears to the Board that the relief (if any) to which a person is entitled under section 266 has been exceeded or might be exceeded unless the premiums payable by him under any policy or contract were paid in full, they may, by notice to that person and to the person to whom the payments are made, exclude the application of subsection (5) of that section in relation to any payments due or made after such date as may be specified in the notice and before such date as may be specified in a further notice to those persons.

(2) Where the application of section 266(5) is so excluded in relation to any payments, the relief (if any) to which the person by whom the payments are made is entitled under section 266 shall be given to him under paragraph 6 below.

5 Where a person is entitled to relief under section 266 in respect of a payment to which section 595 applies, section 266(5) shall not apply but the like relief shall be given to him under paragraph 6 below.

6 (1) Where in any year of assessment the relief to which a person is entitled under section 266, otherwise than in accordance with subsections (6) and (7) of that section, has not been fully given in accordance with that section and the preceding provisions of this Schedule, he may claim relief for the difference, and relief for the difference shall then be given by a payment made by the Board or by discharge or repayment of tax or partly in one such manner and partly in another; and where relief so given to any person exceeds that to which he is entitled under section 266, he shall be liable to make good the excess and an inspector may make such assessments as may in his judgment be required for recovering the excess.

(2) The Management Act shall apply to any assessment under this paragraph as if it were an assessment to tax for the year of assessment in which the relief was given and as if--

(a) the assessment were among those specified in sections 55(1) (recovery of tax not postponed) and 86(2) (interest on overdue tax) of that Act; and

(b) the sum charged by the assessment were tax specified in paragraph 3 of the Table in section 86(4) of that Act (reckonable date).

7 (1) The Board may make regulations for carrying into effect section 266(4), (5), (8) and (9) and the preceding provisions of this Schedule and paragraphs 9 and 10 of Schedule 15 ("the relevant provisions").

(2) Regulations under this paragraph may, without prejudice to the generality of sub-paragraph (1) above, provide--

(a) for the furnishing of such information by persons by whom premiums are payable as may be necessary for determining whether they are entitled to make deductions under section 266(5) and for excluding the operation of that subsection in relation to payments made by persons who fail to comply with the regulations;

(b) for rounding to a multiple of one penny any payment which, after a deduction authorised under section 266(5), is not such a multiple;

(d) for the furnishing of such information by persons by or to whom premiums are payable as appears to the Board necessary for deciding such claims and for exercising their powers under paragraph 4 or 6 above; and

(e) for requiring persons to whom premiums are paid to make available for inspection by an officer authorised by the Board such books and other documents in their possession or under their control as may reasonably be required for the purposes of determining whether any information given by those persons for the purposes of the relevant provisions is correct and complete.

(3) The following provisions of the Management Act, that is to say--

(a) section 29(3)(c) (excessive relief);

(b) section 30 (recovery of tax repaid in consequence of fraud or negligence etc.);

(d) section 95 (incorrect return or accounts);

shall apply in relation to the payment of a sum claimed under section 266(5)(b) to which the claimant was not entitled as if it had been income tax repaid as a relief which was not due.

8 (1) A policy of life insurance issued in respect of an insurance made on or before 19th March 1968 shall be treated for the purposes of section 266(3)(b) as issued in respect of one made after that date if varied after that date so as to increase the benefits secured or to extend the term of the insurance.

(2) A variation effected before the end of the [1968 c. 44.] year 1968 shall be disregarded for the purposes of sub-paragraph (1) above if its only effect was to bring into conformity with paragraph 2 of Schedule 9 to the Finance Act 1968 (qualifying conditions for endowment policies, and now re-enacted as paragraph 2 of Schedule 15 to this Act) a policy previously conforming therewith except as respects the amount guaranteed on death, and no increase was made in the premiums payable under the policy.

(3) A policy which was issued in the course of industrial assurance business in respect of an insurance made after 13th March 1984 shall be treated for the purposes of section 266(3)(c) and this paragraph as issued in respect of an insurance made on or before that date if--

(a) the proposal form for the policy was completed on or before that date; and

(b) on or before 31st March 1984 the policy was prepared for issue by the company or society concerned; and

(c) on or before 31st March 1984 and in accordance with the normal business practice of the company or society a permanent record of the preparation of the policy was made in any book or by any other means kept or instituted by the company or society for the purpose.

(4) For the purposes of section 266(3)(c) a policy of life insurance which was issued in respect of an insurance made on or before 13th March 1984 shall be treated as issued in respect of an insurance made after that date if the policy is varied after that date so as to increase the benefits secured or to extend the term of the insurance.

(5) If a policy of life insurance which was issued as mentioned in sub-paragraph (4) above confers on the person to whom it was issued an option to have another policy substituted for it or to have any of its terms changed, then, for the purposes of that sub-paragraph and section 266(3)(c), any change in the terms of the policy which is made in pursuance of the option shall be deemed to be a variation of the policy.

(6) In any case where--

(a) one policy is replaced by another in such circumstances that the provisions of paragraph 20 of Schedule 15 apply; and

(b) the earlier policy was issued in respect of an insurance made on or before 13th March 1984; and

(c) the later policy confers on the life or lives assured thereby benefits which are substantially equivalent to those which would have been enjoyed by the life or lives assured under the earlier policy, if that policy had continued in force;

then, for the purposes of section 266(3)(c), the insurance in respect of which the later policy is issued shall be deemed to have been made before 13th March 1984; and in this sub-paragraph "the earlier policy" and "the later policy" have the same meaning as in paragraph 20 of Schedule 15.

(7) In any case where--

(a) there is a substitution of policies falling within paragraph 25(1) or (3) of Schedule 15; and

(b) the old policy was issued in respect of an insurance made on or before 13th March 1984;

then, for the purposes of section 266(3)(c), the insurance in respect of which the new policy is issued shall be deemed to have been made before 13th March 1984; and in this sub-paragraph "the old policy" and "the new policy" have the same meaning as in paragraph 17 of Schedule 15.

Section 267.

SCHEDULE 15 QUALIFYING POLICIES

PART I QUALIFYING CONDITIONS

General rules applicable to whole life and term assurances

1 (1) Subject to the following provisions of this Part of this Schedule, if a policy secures a capital sum which is payable only on death, or one payable either on death or on earlier disability, it is a qualifying policy if--

(a) it satisfies the conditions appropriate to it under sub-paragraphs (2) to (5) below, and

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