Income and Corporation Taxes Act 1988 (c. 1)

(The document as of February, 2008)

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(b) the content and effect of any notice given by the Board under paragraph 15(4) above.

Section 761(1).

SCHEDULE 28 COMPUTATION OF OFFSHORE INCOME GAINS

PART I DISPOSALS OF INTERESTS IN NON-QUALIFYING FUNDS

Interpretation

1 In this Part of this Schedule "material disposal" means a disposal to which this Chapter applies, otherwise than by virtue of section 758.

Calculation of unindexed gain

2 (1) Where there is a material disposal, there shall first be determined for the purposes of this Part of this Schedule the amount (if any) which, in accordance with the provisions of this paragraph, is the unindexed gain accruing to the person making the disposal.

(2) Subject to section 757(3) to (6) and paragraph 3 below, the unindexed gain accruing on a material disposal is the amount which would be the gain on that disposal for the purposes of the 1979 Act if it were computed--

(a) without regard to any charge to income tax or corporation tax by virtue of section 761; and

(b) without regard to any indexation allowance on the disposal under Chapter III of Part III of the [1982 c. 39.] Finance Act 1982.

3 (1) If the amount of any chargeable gain or allowable loss which (apart from section 763) would accrue on the material disposal would fall to be determined in a way which, in whole or in part, would take account of the indexation allowance on an earlier disposal to which paragraph 2 of Schedule 13 to the Finance Act 1982 (disposals on a no gain/no loss basis) applies, the unindexed gain on the material disposal shall be computed as if--

(a) no indexation allowance had been available on any such earlier disposal; and

(b) subject to that, neither a gain nor a loss had accrued to the person making such an earlier disposal.

(2) If the material disposal forms part of a transfer to which section 123 of the 1979 Act (roll-over relief on transfer of business) applies, the unindexed gain accruing on the disposal shall be computed without regard to any deduction which falls to be made under that section in computing a chargeable gain.

(3) If the material disposal is made otherwise than under a bargain at arm's length and a claim for relief is made in respect of that disposal under section 79 of the [1980 c. 48.] Finance Act 1980 (relief for gifts), that section shall not affect the computation of the unindexed gain accruing on the disposal.

(4) Where, in the case of an insurance company carrying on life assurance business, a profit arising from general annuity business and attributable to a material disposal falls (or would but for the reference to offshore income gains in section 437(2) fall) to be taken into account in the computation under section 436, the unindexed gain, if any, accruing to the company on the disposal shall be computed as if section 31(1) of the 1979 Act (exclusion of certain sums in computing chargeable gain) did not apply.

(5) Notwithstanding section 29 of the 1979 Act (losses determined in like manner as gains) if, apart from this sub-paragraph, the effect of any computation under the preceding provisions of this Part of this Schedule would be to produce a loss, the unindexed gain on the material disposal shall be treated as nil; and accordingly for the purposes of this Part of this Schedule no loss shall be treated as accruing on a material disposal.

(6) Section 431 has effect in relation to sub-paragraph (4) above as if it were included in Chapter I of Part XII.

Gains since 1st January 1984

4 (1) This paragraph applies where--

(a) the interest in the offshore fund which is disposed of by the person making a material disposal was acquired by him before 1st January 1984; or

(b) he is treated by virtue of any provision of sub-paragraphs (3) and (4) below as having acquired the interest before that date.

(2) Where this paragraph applies, there shall be determined for the purposes of this Part of this Schedule the amount which would have been the gain on the material disposal--

(a) on the assumption that, on 1st January 1984, the interest was disposed of and immediately reacquired for a consideration equal to its market value at that time; and

(b) subject to that, on the basis that the gain is computed in like manner as, under paragraphs 2 and 3 above, the unindexed gain on the material disposal is determined;

and that amount is in paragraph 5 below referred to as the "post-1983 gain" on the material disposal.

(3) Where the person making the material disposal acquired the interest disposed of--

(a) on or after 1st January 1984, and

(b) in such circumstances that, by virtue of any enactment other than section 86(5) of or Schedule 13 to the [1982 c. 39.] Finance Act 1982 (indexation provisions), he and the person from whom he acquired it ("the previous owner") fell to be treated for the purposes of the 1979 Act as if his acquisition were for a consideration of such an amount as would secure that, on the disposal under which he acquired it, neither a gain nor a loss accrued to the previous owner,

the previous owner's acquisition of the interest shall be treated as his acquisition of it.

(4) If the previous owner acquired the interest disposed of on or after 1st January 1984 and in circumstances similar to those referred to in sub-paragraph (3) above, his predecessor's acquisition of the interest shall be treated for the purposes of this paragraph as the previous owner's acquisition, and so on back through previous acquisitions in similar circumstances until the first such acquisition before 1st January 1984 or, as the case may be, until an acquisition on a material disposal on or after that date.

The offshore income gain

5 (1) Subject to sub-paragraph (2) below, a material disposal gives rise to an offshore income gain of an amount equal to the unindexed gain on that disposal.

(2) In any case where--

(a) paragraph 4 above applies, and

(b) the post-1983 gain on the material disposal is less than the unindexed gain on the disposal,

the offshore income gain to which the disposal gives rise is an amount equal to the post-1983 gain.

PART II DISPOSALS INVOLVING AN EQUALISATION ELEMENT

6 (1) Subject to paragraph 7 below, a disposal to which this Chapter applies by virtue of section 758(3) gives rise to an offshore income gain of an amount equal to the equalisation element relevant to the asset disposed of.

(2) Subject to sub-paragraphs (4) to (6) below, the equalisation element relevant to the asset disposed of by a disposal falling within sub-paragraph (1) above is the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if, on the date of the disposal, the asset which is disposed of were acquired by another person by way of initial purchase.

(3) In the following provisions of this Part of this Schedule, a disposal falling within sub-paragraph (1) above is referred to as a "disposal involving an equalisation element".

(4) Where the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal after the beginning of the period by reference to which the accrued income referred to in sub-paragraph (2) above is calculated, the amount which, apart from this sub-paragraph, would be the equalisation element relevant to that asset shall be reduced by the following amount, that is to say--

(a) if that acquisition took place on or after 1st January 1984, the amount which, on that acquisition, was credited to the equalisation account of the offshore fund concerned in respect of accrued income or, as the case may be, would have been so credited if that acquisition had been an acquisition by way of initial purchase; and

(b) in any other case, the amount which would have been credited to that account in respect of accrued income if that acquisition had been an acquisition by way of initial purchase taking place on 1st January 1984.

(5) In any case where--

(a) the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal at or before the beginning of the period by reference to which the accrued income referred to in sub-paragraph (2) above is calculated, and

(b) that period began before 1st January 1984 and ends after that date,

the amount which, apart from this sub-paragraph, would be the equalisation element relevant to that asset shall be reduced by the amount which would have been credited to the equalisation account of the offshore fund concerned in respect of accrued income if the acquisition referred to in paragraph (a) above had been an acquisition by way of initial purchase taking place on 1st January 1984.

(6) Where there is a disposal involving an equalisation element, then, to the extent that any amount which was or would be credited to the equalisation account of the offshore fund in respect of accrued income, as mentioned in any of sub-paragraphs (2) to (5) above, represents profits from dealing in commodities, within the meaning of paragraph 4 of Schedule 27, one half of that accrued income shall be left out of account in determining under those sub-paragraphs the equalisation element relevant to the asset disposed of by that disposal.

7 (1) For the purposes of this Part of this Schedule, there shall be determined, in accordance with paragraph 8 below, the Part I gain (if any) on any disposal involving an equalisation element.

(2) Notwithstanding anything in paragraph 6 above--

(a) if there is no Part I gain on a disposal involving an equalisation element, that disposal shall not give rise to an offshore income gain; and

(b) if, apart from this paragraph, the offshore income gain on a disposal involving an equalisation element would exceed the Part I gain on that disposal, the offshore income gain to which that disposal gives rise shall be reduced to an amount equal to that Part I gain.

8 (1) On a disposal involving an equalisation element, the Part I gain is the amount (if any) which, by virtue of Part I of this Schedule (as modified by sub-paragraphs (2) to (5) below), would be the offshore income gain on that disposal if it were a material disposal within the meaning of that Part.

(2) For the purposes only of the application of Part I of this Schedule to determine the Part I gain (if any) on a disposal involving an equalisation element, subsections (5) and (6) of section 758 shall have effect as if, in subsection (5), the words "by virtue of subsection (3) above" were omitted.

(3) If a disposal involving an equalisation element is one which, by virtue of any enactment other than section 86(5)(b) of or Schedule 13 to the [1982 c. 39.] Finance Act 1982, is treated for the purposes of the 1979 Act as one on which neither a gain nor a loss accrues to the person making the disposal, then, for the purpose only of determining the Part I gain (if any) on the disposal, that enactment shall be deemed not to apply to it (but without prejudice to the application of that enactment to any earlier disposal).

(4) In any case where a disposal involving an equalisation element is made by a company which has made an election under Schedule 6 to the [1983 c. 28.] Finance Act 1983 (indexation: election for pooling) and the asset disposed of consists of or includes securities which, by virtue of paragraph 3(3) of that Schedule, are to be treated for the purposes of the 1979 Act as a single asset or part of a single asset, then, for the purpose only of determining the Part I gain (if any) on the disposal--

(a) the reference in paragraph 2(2)(b) above to an indexation allowance under Chapter III of Part III of the Finance Act 1982 shall be construed as including a reference to an indexation allowance under Schedule 6 to the Finance Act 1983; and

(b) if some of the securities comprised in the asset disposed of were acquired by the company making the disposal before 1st January 1984 and some were not, paragraph 4(2) above shall not apply and paragraph 5 above shall have effect with the omission of sub-paragraph (2) (together with the reference to it in sub-paragraph (1)).

(5) The reference in sub-paragraph (4)(b) above to securities acquired before 1st January 1984 includes a reference to securities which, by virtue of any provision of paragraph 4 above, are treated as so acquired.

Section 844.

SCHEDULE 29 CONSEQUENTIAL AMENDMENTS

THE CAPITAL ALLOWANCES ACTS

1 The [1968 c. 3.] Capital Allowances Act 1968 and Part III of the [1971 c. 68.] Finance Act 1971 shall apply in relation to a trade, profession or vocation chargeable in accordance with section 65(3) as they apply to one chargeable to tax under Case I or II of Schedule D.

2 No allowance shall be made under Chapter I of Part III of the Finance Act 1971 in respect of any expenditure incurred by a Member of the House of Commons in or in connection with the provision or use of residential or overnight accommodation to enable him to perform his duties as such a Member in or about the Palace of Westminster or his constituency.

TAXES MANAGEMENT ACT 1970 c. 9

3 The Taxes Management Act 1970 shall have effect subject to the amendments made by paragraphs 4 to 10 below.

4 The following subsections shall be inserted in section 8 after subsection (3)--

" (3A) A notice given to trustees under this section may require a return of the income arising to them to include particulars of the manner in which the income has been applied, including particulars as to the exercise of any discretion and of the persons in whose favour it has been exercised.

In this subsection "trustees" and "income" have the same meaning as in section 686 of the principal Act.

(3B) A notice given to a person under this section may require him to include in the return of his income particulars of premiums paid by him or his wife living with him under policies of life insurance or contracts for deferred annuities and of deductions made from the premiums payable. "

5 In section 16(1)(c) and (2)(b) after "copyright" there shall be inserted "or public lending right".

6 The following section shall be inserted after section 16--

" 16A Agency workers

(1) Where--

(a) any services which an individual renders or is under an obligation to render under a contract are treated under section 134(1) of the principal Act as the duties of an office or employment held by him; or

(b) any remuneration receivable under or in consequence of arrangements to which subsection (6) of that section applies is treated under that subsection as emoluments of an office or employment held by an individual,

section 15 above shall apply as if that individual were employed--

(i) in a case within paragraph (a) above, by the persons or each of the persons from whom he receives any remuneration under or in consequence of the contract; and

(ii) in a case within paragraph (b) above, by the other party to the arrangements,

and section 16 above shall not apply to any payments made to that individual under or in consequence of that contract or those arrangements.

(2) In subsection (1) above "remuneration", in relation to an individual, does not include anything in respect of which he would not have been chargeable to tax under Schedule E if it had been receivable in connection with an office or employment held by him but, subject to that, includes every form of payment and all perquisites, benefits and profits whatsoever. "

7 (1) In subsection (1) of section 18 after the words "income tax" there shall be inserted the words "other than interest to which subsection (4) below applies".

(2) In subsection (2) and (3) of that section for the words "this section" there shall be substituted the words "subsection (1) above".

(3) The following subsection shall be inserted at the end of that section--

" (4) Where interest on any securities issued subject to the condition that interest is payable without deduction of tax is paid without deduction of tax--

(a) any person by whom such interest is paid,

(b) any person who receives, on behalf of any other person who is a registered or inscribed holder of such securities, any interest paid without deduction of tax, and

(c) any person who has acted as intermediary in the purchase of any securities on which the interest is payable without deduction of tax,

shall, on being so required by the Board, furnish to the Board--

(i) the names and addresses of the persons to whom such interest has been paid, or on whose behalf such interest has been received, or on whose behalf such securities have been purchased, and

(ii) the amount of the interest so paid or received, or the amount of the securities so purchased. "

8 (1) In subsection (1) of section 55 (recovery of tax not postponed) the following paragraph shall be added after paragraph (f)--

" (g) a notice under subsection (1) or subsection (3) of section 753 of the principal Act where, before the appeal is determined, the appellant is assessed to tax under section 747(4)(a) of that Act by reference to an amount of chargeable profits specified in that notice " .

(2) The following subsection shall be inserted in that section after subsection (6)--

" (6A) Where an appeal is brought against an assessment to tax under section 747(4)(a) of the principal Act as well as against a notice under section 753(1) or (3) of that Act--

(a) an application under subsection (3) above may relate to matters arising on both appeals and, in determining the amount of tax the payment of which should be postponed, the Commissioners shall consider the matters so arising together; and

(b) if the Commissioners have determined the amount of tax the payment of which should be postponed solely in relation to one of the appeals, the bringing of the other appeal shall be taken to be a change of circumstances falling within subsection (4) above; and

(c) any reference in this section to the determination of the appeal shall be construed as a reference to the determination of the two appeals, but the determination of one before the other shall be taken to be a change of circumstances falling within subsection (4) above. "

9 The following Table shall be substituted for the Table in section 98--

" TABLE

1.	2.
Part III of this Act, except sections 16 and 24(2).	In the principal Act-- section 38(5);
Section 51 of this Act.	section 41(2);
In the principal Act--	section 42;
section 181(1);	section 124(3);
regulations under section 202;	section 136(6);
section 217;	section 139(5) or (6);
section 226(3) and (4);	section 148(7);
section 234(7)(b), (8) and (9);	section 180(1);
section 250(6) and (7);	regulations under section 202;
section 272(7);	regulations under section 203;
section 310(4) and (5);	section 216;
regulations under section 333;	section 226(1) and (2);
regulations under section 476(1);	section 234(5), (6) and (7)(a);
section 481(5)(k);	section 250(1) to (5);
section 482(3);	section 310(1), (2) and (3);
regulations under section 482(11);	section 313(5);
section 483;	regulations under section 333;
regulations under section 555(7);	section 350(1);
section 561(8);	section 375(5);
section 588(7);	regulations under section 476(1);
regulations under section 602;	regulations under section 482(11);
section 605(1), (2), (3)(b) and (4);	section 552;
regulations under section 612(3);	regulations under section 555(7);
regulations under section 639;	regulations under section 566(1) or (2);
section 652;
section 669;	section 577(4);
section 680;	section 588(6);
section 700(4);	regulations under section 602;
section 708;	section 605(3)(a);
section 728;	regulations under section 612(3);
section 729(11);	regulations under section 639;
section 730(8);	section 772(6);
section 737(8);	Schedule 3, paragraph 6;
section 745(1);	Schedule 13;
section 755;	regulations under paragraph 7 of Schedule 14;
section 768(9);
section 772(1) and (3);	Schedule 15, paragraph 14(4);
section 774(5);	Schedule 16;
section 778;	Schedule 22, paragraph 2.
section 815;	Regulations under section 149D of the Capital Gains Tax Act 1979.
Schedule 3, paragraph 13(1);
Schedule 5, paragraph 10;	Section 67(2) of, and paragraph 4(1) of Schedule 12 to, the Finance Act 1980.
Schedule 9, paragraphs 6 and 25;
Schedule 15, paragraph 14(5);
Schedule 19, paragraph 17;	Regulations 16 and 17 of the Income Tax (Interest Relief) Regulations 1982.
Schedule 22, paragraph 4.
Section 32 of the Finance Act 1973.
Paragraph 2 of Schedule 15 to the Finance Act 1973.	Paragraph 15(3) of Schedule 14 to the Finance Act 1984.
Regulations under section 149D of the Capital Gains Tax Act 1979.	Paragraph 10 of Schedule 16 to the Finance Act 1986.
Paragraph 6(9) of Schedule 1 to the Capital Gains Tax Act 1979.
Section 67(4) of, and paragraph 4(3) of Schedule 12 to, the Finance Act 1980.
Section 84 of the Finance Act 1981.
Paragraph 15(1) of Schedule 14 to the Finance Act 1984.
Paragraph 6(1) of Schedule 22 to the Finance Act 1985.

The references in this Table to regulations under section 602 have effect only for the purpose of giving effect to any provision mentioned in paragraphs (a) and (b) of subsection (2) of that section. "

10 (1) The Taxes Management Act 1970, as amended by the Finance (No.2) Act 1987, shall have effect, after the day appointed under section 95 of the 1987 Act for the purposes of the provision in question, subject to the following amendments.

(2) In section 11(8) for "286" there shall be substituted "419".

(3) In section 30(2A) and (3A) for "87 of the Finance (No.2) Act 1987" there shall be substituted "826 of the principal Act".

(4) In section 87A--

(a) in subsection (1) for "243(4)" there shall be substituted "10";

(b) in subsection (3) for the words from "266" to "Taxes Act" there shall be substituted "346(2) or 347(1) of the principal Act, section 267(3C) or 278(5) of the Income and Corporation Taxes Act 1970";

(c) in subsection (4), in paragraph (a) for "85 of the Finance Act 1972" there shall be substituted "239 of the principal Act", and in paragraph (b) for "85" there shall be substituted "239"; and

(d) in subsection (5) for the words from "subsection" to "1972" there shall be substituted "section 252(5) of the principal Act".

(5) In section 89 for "87 of the Finance (No.2) Act 1987" there shall be substituted "826 of the principal Act".

(6) In section 91(2A) for "90 of the Finance (No.2) Act 1987" there shall be substituted "10 of the principal Act".

(7) In section 94(8) for the words from "subsection (3)" to "1972" there shall be substituted "section 239(3) of the principal Act";

(8) In section 109--

(a) in subsection (3) for "286" and "(4)" there shall be substituted "419" and "(3)";

(b) in subsection (3A) for "(5)" and "286" (twice) there shall be substituted "(4)" and "419".

THE FRIENDLY SOCIETIES ACT (NORTHERN IRELAND) 1970 c. 31 (N.I.)

11 In section 1 of the Friendly Societies Act (Northern Ireland) 1970 at the end of subsection (3) there shall be added the following-- " but nothing in this subsection shall apply with respect to--

(a) policies issued in respect of insurances made on or after 19th March 1985; or

(b) policies issued in respect of insurances made before that date which are varied on or after that date. "

THE FINANCE ACT 1973 c. 51

12 In section 38 of the Finance Act 1973 the following shall be substituted for subsection (4)--

" (4) Gains accruing to a person not resident in the United Kingdom on the disposal of exploration or exploitation rights or of exploration or exploitation assets shall, for the purposes of capital gains tax or corporation tax on chargeable gains, be treated as gains accruing on the disposal of assets used for the purposes of a trade carried on by that person in the United Kingdom through a branch or agency.

This subsection shall have effect in relation to gains accruing on disposals before 13th March 1984 with the omission of the words "exploration or exploitation assets". "

FRIENDLY SOCIETIES ACT 1974 c. 46

13 In section 7 of the Friendly Societies Act 1974 at the end of subsection (3) there shall be added the following-- " but nothing in this subsection shall apply with respect to--

(a) policies issued in respect of insurances made on or after 19th March 1985; or

(b) policies issued in respect of insurances made before that date which are varied on or after that date. "

THE SOCIAL SECURITY ACTS

14 In section 9(1) of the [1975 c. 14.] Social Security Act 1975 and the [1975 c. 15.] Social Security (Northern Ireland) Act 1975 (Class IV contributions) the reference to profits or gains chargeable to income tax under Case I or II of Schedule D shall be taken to include a reference to profits or gains consisting of a payment of enterprise allowance (within the meaning of section 127 of this Act) chargeable to income tax under Case VI of Schedule D.

CAPITAL GAINS TAX ACT 1979 c. 14

15 In the Capital Gains Tax Act 1979--

(a) for "the Taxes Act", in each place where it occurs except sections 1, 31 and 34(4)(a), the definition of "the Taxes Act" in section 155(1) and paragraph 6(8) of Schedule 1 and any provision mentioned in paragraph (b) below, there shall be substituted "the Taxes Act 1988";

(b) in sections 16, 26, 29A, 32, 35, 75, 84, 87, 98, 107 and 136(10), paragraphs 4 and 5 of Schedule 5 and paragraphs 12 and 21 of Schedule 6 for "the Taxes Act" there shall be substituted "the Taxes Act 1970";

and in addition the 1979 Act shall have effect subject to the amendments specified in relation thereto in paragraphs 16 to 28 and 32 below.

16 In section 18 (residence etc.) the following subsections shall be inserted after subsection (4)--

" (5) A period during which a member of a visiting force to whom section 323(1) of the Taxes Act 1988 applies is in the United Kingdom by reason solely of his being a member of that force shall not be treated for the purposes of capital gains tax either as a period of residence in the United Kingdom or as creating a change in his residence or domicile.

This subsection shall be construed as one with subsection (2) of section 323 and subsections (4) to (8) of that section shall apply accordingly.

(6) An Agent-General who is resident in the United Kingdom shall be entitled to the same immunity from capital gains tax as that to which the head of a mission so resident is entitled under the Diplomatic Privileges Act 1964.

(7) Any person having or exercising any employment to which section 320(2) of the Taxes Act 1988 applies (not being a person employed in any trade, business or other undertaking carried on for the purposes of profit) shall be entitled to the same immunity from capital gains tax as that to which a member of the staff of a mission is entitled under the Diplomatic Privileges Act 1964.

(8) Subsections (6) and (7) above shall be construed as one with section 320 of the Taxes Act 1988. "

17 In section 31 (consideration chargeable to tax on income) the following subsection shall be inserted after subsection (3)--

" (4) The reference in subsection (1) above to computing income or profits or gains or losses shall not be taken as applying to a computation of a company's income for the purposes of subsection (2) of section 76 of the Taxes Act 1988. "

18 The following section shall be inserted after section 32--

" 32A Expenditure: amounts to be included as consideration

(1) Section 32(1)(a) above applies as if the relevant amount as defined in the following provisions of this section in the cases there specified had formed part of the consideration given by the person making the disposal for his acquisition of the assets in question.

(2) Where an amount is chargeable to tax by virtue of section 162(5) of the Taxes Act 1988 in respect of shares or an interest in shares, then--

(a) on a disposal of the shares or interest, where that is the event giving rise to the charge; or

(b) in any case, on the first disposal of the shares or interest after the event,

the relevant amount is a sum equal to the amount so chargeable.

(3) If a gain chargeable to tax under section 135(1) or (6) of the Taxes Act 1988 is realised by the exercise of a right to acquire shares, the relevant amount is a sum equal to the amount of the gain so chargeable to tax.

(4) Where an amount is chargeable to tax under section 138 of the Taxes Act 1988 on a person acquiring any shares or interest in shares, then on the first disposal (whether by him or another person) of the shares after his acquisition, the relevant amount is an amount equal to the amount so chargeable.

(5) Where an amount was chargeable to tax under section 185(6) of the Taxes Act 1988 in respect of shares acquired in exercise of any such right as is mentioned in section 185(1) of that Act, the relevant sum in relation to those shares is an amount equal to the amount so chargeable.

(6) Subsections (2), (3), (4) and (5) above shall be construed as one with sections 162, 135, 138 and 185 of the Taxes Act 1988 respectively. "

19 In section 33 (exclusion of certain expenditure) the following subsection shall be added after subsection (2)--

" (3) No account shall be taken of any relief under Chapter II of Part IV of the Finance Act 1981 or under Schedule 5 to the Finance Act 1983, in so far as it is not withdrawn and relates to shares issued before 19th March 1986, in determining whether any sums are excluded by virtue of subsection (1) or (2) above from the sums allowable as a deduction in the computation of gains or losses for the purposes of this Act. "

20 The following section shall be inserted after section 33--

" 33A Transfer of certain securities

(1) Where there is a transfer of securities within the meaning of section 710 of the Taxes Act 1988 (accrued income scheme)--

(a) if section 713(2)(a) or (3)(a) of that Act applies, section 31 above shall be disregarded in computing for capital gains tax purposes the gain accruing on the disposal concerned;

(b) if section 713(2)(b) or (3)(b) of that Act applies, section 33 above shall be disregarded in computing for capital gains tax purposes the gain accruing to the transferee if he disposes of the securities;

but subsections (2) and (3) below shall apply.

(2) Where the securities are transferred with accrued interest (within the meaning of section 711 of that Act)--

(a) if section 713(2)(a) of that Act applies, an amount equal to the accrued amount (determined under that section) shall be excluded from the consideration mentioned in subsection (8) below;

(b) if section 713(2)(b) of that Act applies, an amount equal to that amount shall be excluded from the sums mentioned in subsection (9) below.

(3) Where the securities are transferred without accrued interest (within the meaning of section 711 of that Act)--

(a) if section 713(3)(a) of that Act applies, an amount equal to the rebate amount (determined under that section) shall be added to the consideration mentioned in subsection (8) below;

(b) if section 713(3)(b) of that Act applies, an amount equal to that amount shall be added to the sums mentioned in subsection (9) below.

(4) Where section 716 of that Act applies--

(a) if subsection (2) or (3) of that section applies, section 31 above shall be disregarded in computing for capital gains tax purposes the gain accruing on the disposal concerned, but the relevant amount shall be excluded from the consideration mentioned in subsection (8) below; and

(b) if subsection (4) of that section applies and the securities were transferred as mentioned in subsection (1) of that section after 18th March 1986, section 33 above shall be disregarded in computing for capital gains tax purposes the gain accruing on the disposal concerned, but the relevant amount shall be excluded from the sums mentioned in subsection (9) below.

(5) In subsection (4) above "the relevant amount" means an amount equal to--

(a) if paragraphs (b) and (c) below do not apply, the amount of the unrealised interest in question;

(b) if section 719 of the Taxes Act 1988 applies--

(i) in a case falling within subsection (4)(a) above, amount A (within the meaning of section 719);

(ii) in a case falling within subsection (4)(b) above, amount C (within the meaning of section 719);

(c) if the unrealised interest is subject to the provisions of regulations under section 476(1) of that Act and would not on being paid (to whatever person) be a gross payment within the meaning of those regula-tions, the grossed up equivalent of the unrealised interest (calculated in accordance with section 726 of that Act).

Paragraphs (a), (b) and (c) above shall be construed as one with sections 716, 719 and 726 respectively.

(6) In relation to any securities which by virtue of subsection (7) below are treated for the purposes of this sub-paragraph as having been transferred, subsections (2) and (3) above shall have effect as if for "applies" (in each place where it occurs) there were substituted "would apply if the disposal were a transfer".

(7) Where there is a disposal of securities for capital gains tax purposes which is not a transfer for the purposes of section 710 of the Taxes Act 1988 but, if it were such a transfer, one or more of the following paragraphs would apply, namely, paragraphs (a) and (b) of section 713(2) and paragraphs (a) and (b) of section 713(3) of that Act, the securities shall be treated--

(a) for the purposes of subsection (6) above, as transferred on the day of the disposal, and

(b) for the purposes of subsections (2) and (3) above, as transferred with accrued interest if, had the disposal been a transfer for the purposes of section 710, it would have been a transfer with accrued interest and as transferred without accrued interest if, had the disposal been such a transfer, it would have been a transfer without accrued interest.

(8) The consideration is the consideration for the disposal of the securities transferred which is taken into account in the computation for capital gains tax purposes of the gain accruing on the disposal.

(9) The sums are the sums allowable to the transferee as a deduction from the consideration in the computation for capital gains tax purposes of the gain accruing to him if he disposes of the securities.

(10) Where on a conversion or exchange of securities a person is treated as entitled to a sum under subsection (2)(a) of section 713 of the Taxes Act 1988 an amount equal to the accrued amount (determined under that section) shall, for capital gains tax purposes, be treated as follows--

(a) to the extent that it does not exceed the amount of any consideration which the person receives (or is deemed to receive) or becomes entitled to receive on the conversion or exchange (other than his new holding), it shall be treated as reducing that consideration; and

(b) to the extent that it does exceed that amount, it shall be treated as consideration which the person gives on the conversion or exchange;

and where on a conversion or exchange of securities a person is treated as entitled to relief under subsection (3)(a) of that section an amount equal to the rebate amount (determined under that section) shall, for capital gains tax purposes, be treated as consideration which the person receives on the conversion or exchange.

(11) In subsection (10) above "conversion" means conversion within the meaning of section 82 below and "exchange" means an exchange which by virtue of Chapter II of Part IV of this Act does not involve a disposal. "

21 In section 101 the following subsection shall be inserted after subsection (8)--

" (8A) Section 356(3)(b) and (5) of the Taxes Act 1988 shall apply for the purposes of subsection (8) above only in relation to residence on or after 6th April 1983 in living accommodation which is job-related within the meaning of that section. "

22 The following section shall be inserted after section 123--

" 123A Harbour authorities

(1) For the purposes of this Act any asset transferred on the transfer of the trade shall be deemed to be for a consideration such that no gain or loss accrues to the transferor on its transfer; and for the purposes of Schedule 5 to this Act the transferee shall be treated as if the acquisition by the transferor of any asset so transferred had been the transferee's acquisition thereof.

(2) This section applies only where the trade transferred is transferred from any body corporate other than a limited liability company to a harbour authority by or under a certified harbour reorganisation scheme (within the meaning of section 518 of the Taxes Act 1988) which provides also for the dissolution of the transferor. "

23 The following section shall be inserted after section 132--

" 132A Deep discount securities

(1) Subject to subsections (2) and (3) below, in computing for the purposes of capital gains tax, the gain accruing on the disposal by any person of any deep discount securities (within the meaning of Schedule 4 to the Taxes Act 1988)--

(a) section 31 above shall not apply but the consideration for the disposal shall be treated as reduced by the amount mentioned in paragraph 4(1)(a) of that Schedule (including any amount mentioned in paragraph 3 of that Schedule); and

(b) where that amount exceeds the consideration for the disposal, the amount of the excess shall be treated as expenditure within section 32(1)(b) above incurred by that person on the security immediately before the disposal.

(2) Subsection (3) below applies where--

(a) there is a conversion of securities to which section 82 above applies and those securities include deep discount securities; or

(b) securities including deep discount securities are exchanged (or by virtue of section 86(1) above are treated as exchanged) for other securities in circumstances in which section 85(3) above applies.

(3) Where this subsection applies--

(a) subsection (1) and section 31 above shall not apply but any sum payable to the beneficial owner of the deep discount securities by way of consideration for their disposal (in addition to his new holding) shall be treated for the purpose of capital gains tax as reduced by the amount of the accrued income on which he is chargeable to income tax by virtue of paragraph 7(3) of Schedule 4 to the Taxes Act 1988 or, in a case where paragraph 3 of that Schedule applies, on which he would be so chargeable if that paragraph did not apply; and

(b) where that amount exceeds any such sum, the excess shall be treated as expenditure within section 32(1)(b) above incurred by him on the security immediately before the time of the conversion or exchange.

(4) Where a disposal of a deep discount security is to be treated for the purposes of capital gains tax as one on which neither a gain nor a loss accrues to the person making the disposal, the consideration for which the person acquiring the security would, apart from this subsection, be treated for those purposes as having acquired the security shall be increased by the amount mentioned in paragraph 4(1)(a) of Schedule 4 to the Taxes Act 1988 (including any amount mentioned in paragraph 3 of that Schedule). " .

24 The following section shall be inserted after section 142--

" 142A Disposal of assets in premiums trust fund etc

(1) Subject to subsection (4) below, for the year 1972-73 and subsequent years of assessment the chargeable gains or allowable losses accruing on the disposal of assets forming part of a premiums trust fund shall be taken to be those allocated to the corresponding underwriting year.

(2) The amount of the gains or losses so allocated at the end of any accounting period shall be such proportion of the difference mentioned in subsection (3) below as is allocated to the underwriting year under the rules or practice of Lloyd's.

(3) That difference is the difference between the valuations at the beginning and at the end of the accounting period of the assets forming part of the fund, the value at the beginning of the period of assets acquired during the period being taken as the cost of acquisition and the value at the end of the period of assets disposed of during the period being taken as the consideration for the disposal.

(4) Subsections (1) to (3) above do not apply to the computation of chargeable gains or allowable losses on the disposal of gilt-edged securities as defined in Schedule 2 to this Act or of qualifying corporate bonds as defined in section 64 of the Finance Act 1984.

(5) The Board may, by regulations made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons, provide--

(a) for the assessment and collection of tax charged in accordance with this section;

(b) for modifying the provisions of this section in relation to syndicates continuing for more than two years after the end of an underwriting year;

(d) for giving credit for foreign tax. "

25 The following section shall be inserted after section 144--

" Profit sharing and share option schemes

144A Approved profit sharing and share option schemes

(1) Notwithstanding anything in a profit sharing scheme approved under Schedule 9 of the Taxes Act 1988 or in paragraph 2(2) of that Schedule or in the trust instrument relating to that scheme, for the purposes of capital gains tax a person who is a participant in relation to that scheme shall be treated as absolutely entitled to his shares as against the trustees of the scheme.

(2) For the purposes of capital gains tax--

(a) no deduction shall be made from the consideration for the disposal of any shares by reason only that an amount determined under section 186 or 187 of or Schedule 9 or 10 to the Taxes Act 1988 is chargeable to income tax under section 186(3) or (4) of that Act;

(b) any charge to income tax by virtue of section 186(3) of that Act shall be disregarded in determining whether a distribution is a capital distribution within the meaning of section 72(5)(b) above;

(i) the order in which any of a participant's shares are to be treated as disposed of for the purposes of those provisions as they have effect in relation to profit sharing schemes, or

(ii) the shares in relation to which an event is to be treated as occurring for any such purpose,

shall affect the rules applicable to the computation of a gain accruing on a part disposal of a holding of shares or other securities which were acquired at different times; and

(d) a gain accruing on an appropriation of shares to which section 186(11) applies shall not be a chargeable gain.

(3) In subsection (2) above "participant" and "the trust instrument" have the meanings given by section 187 of the Taxes Act 1988.

(4) Where a right to acquire shares in a body corporate is released in consideration of the grant of a right to acquire shares in another body corporate in accordance with a provision included in a scheme pursuant to paragraph 15 of Schedule 9 to the Taxes Act 1988, the transaction shall not be treated for the purposes of this Act as involving any disposal of the first-mentioned right but for those purposes the other right shall be treated as the same asset acquired as the first-mentioned right was acquired.

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