Finance (No. 2) Act 1997 (c. 58)

(The document as of February, 2008)

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(e) section 70A (payment by cheque).

(3) The modifications mentioned in that sub-paragraph are as follows--

(a) in all those provisions references to the collector shall be deemed to include references to any other officer of the Board;

(b) in section 63, the words "under section 60 of this Act" in subsection (1)(b) shall be deemed to be omitted and so shall subsections (3) and (4); and

(i) the reference in subsection (1) to the purposes of the Management Act and the provisions mentioned in subsection (2) of that section shall be deemed to be a reference to the purposes of this Part; and

(ii) subsection (2) shall be deemed to be omitted.

Recovery against other group members

16 (1) Subject to sub-paragraph (3) below, where any amount of windfall tax with which a company is charged is not paid before the end of the period of six months beginning with the time by which it was required to be paid under paragraph 3 above ("the six month period"), any company falling within sub-paragraph (2) below may be assessed (in the name of the chargeable company) to all or any part of the unpaid windfall tax with which the chargeable company is charged.

(2) A company falls within this sub-paragraph if it is one or other or both of the following, that is to say--

(a) a member of the same group as the chargeable company at the end of the six month period; or

(b) a company which has been a member of the same group as the chargeable company at some time on or after 2nd July 1997 and before the end of the six month period.

(3) A company shall not be assessed under sub-paragraph (1) above to any amount of windfall tax at any time more than two years after that company first became assessable to that amount under that sub-paragraph.

(4) This Schedule shall have effect for the purposes of, and in relation to, an assessment under sub-paragraph (1) above as if the amount to which a company is assessable under this paragraph were an amount of windfall tax with which that company is charged.

(5) Where, by virtue of this paragraph, any company ("the group member") pays any amount of windfall tax with which another company ("the charged company") is charged--

(a) that payment shall discharge the liability of the charged company to pay that amount of windfall tax; but

(b) the group member shall be entitled to recover from the charged company the whole amount paid, together with any interest paid by the group member on that amount by virtue of paragraph 12 above.

General provisions about penalties etc.

17 (1) Where a company which has become liable to a tax-geared penalty subsequently becomes liable to another such penalty, the amount or, as the case may be, maximum amount of the subsequent penalty shall be treated as reduced so that the aggregate of the tax-geared penalties to which the company has become liable does not exceed the greater or greatest of them.

(2) In sub-paragraph (1) above "tax-geared penalty" means (subject to sub-paragraph (3) below)--

(a) a penalty under paragraph 2(1) or 14(1) above, or

(b) a penalty under paragraph 2(2) above falling within paragraph 2(3)(b) or (c) above.

(3) Where a company has become liable to both--

(a) a penalty falling within paragraph 2(3)(b) above, and

(b) a penalty falling within paragraph 2(3)(c) above,

the aggregate of those penalties shall be treated as only one tax-geared penalty for the purposes of sub-paragraph (1) above.

(4) The provisions of the Management Act set out in sub-paragraph (5) below shall apply, subject to the modifications set out in sub-paragraph (6) below, in relation to penalties under this Schedule as they apply in relation to the penalties mentioned in those provisions.

(5) The provisions applied by sub-paragraph (4) above are--

(a) section 100 (determination of penalties);

(b) section 100A(2) and (3) (provision supplementary to section 100);

(d) section 100D (penalty proceedings before courts);

(e) section 102 (mitigation of penalties);

(f) section 103 (time limit for penalty proceedings); and

(g) section 103A (interest on penalties).

(6) The modifications mentioned in that sub-paragraph are--

(a) in section 100(2), for the words from "a penalty" onwards there shall be deemed to be substituted a reference to a penalty by virtue of paragraph 13(3) above;

(b) subsection (6) of section 100 shall be deemed to be omitted;

(d) in section 100C(1), the words "General or" shall be deemed to be omitted; and

(e) in section 103, the references to tax in subsection (1) shall be deemed to be references to windfall tax, and subsection (2) shall be deemed to be omitted.

(7) An appeal may be brought against any determination under section 100 of the Management Act of a penalty under this Schedule.

(8) Subject to sub-paragraph (9) below, the provisions of this Schedule relating to an appeal against an assessment to windfall tax shall apply (with the necessary modifications) in relation to any appeal under sub-paragraph (7) above.

(9) Paragraph 10 above shall not apply to an appeal under sub-paragraph (7) above and the powers of the Special Commissioners on an appeal under that sub-paragraph shall be those set out in section 100B(2)(a) and (b) of the Management Act.

(10) Subsection (3) of section 100B of the Management Act (further appeals) shall apply where there has been an appeal under sub-paragraph (7) above as it applies where there has been an appeal under subsection (1) of that section.

(11) The liabilities of any person under this Part shall be without prejudice to any criminal liability arising in relation to the same matter.

Miscellaneous applications

18 (1) The provisions of the Management Act which are set out in sub-paragraph (2) below shall apply for the purposes of this Schedule--

(a) as they apply for the purposes of the enactments for the purposes of which they have effect apart from this paragraph; but

(b) as if any reference in those provisions to a tax included a reference to windfall tax.

(2) Those provisions are--

(a) section 75 (receivers);

(b) section 105 (evidence in cases of fraudulent conduct);

(d) section 112 (lost documents etc.);

(e) section 113(3) (prescription of form of assessments, penalty determinations);

(f) section 114 (provision for errors not to invalidate an assessment);

(g) section 115 (delivery and service of documents) and the regulations made under that section; and

(h) section 118(2) and (4) (extensions of time, reasonable excuse for delay and finality of assessments).

Interpretation

19 (1) In this Schedule--

"the Board" means the Commissioners of Inland Revenue;
"chargeable company" means a company which, on 2nd July 1997, was benefitting from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation;
"group" means a parent undertaking (within the meaning of the [1985 c. 6.] Companies Act 1985 or the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986), together with all of its subsidiary undertakings;
"the Management Act" means the [1970 c. 9.] Taxes Management Act 1970;
"notice" means notice in writing;
"Special Commissioners" has the same meaning as in the Tax Acts.

(2) In this Schedule references to the repayment of an amount of windfall tax include references to making an allowance by way of set-off of an amount of windfall tax against any liability.

(3) References in this Schedule to a penalty under this Schedule include references to a penalty under a provision of the Management Act as applied by this Schedule.

Section 23.

SCHEDULE 3 Insurance companies and friendly societies

Section 76 of the Taxes Act 1988

1 (1) Section 76 of the Taxes Act 1988 (expenses of management: insurance companies) shall be amended as follows.

(2) In subsection (2B) (relevant income from life assurance business to be sum of items in paragraphs (a) and (b)) for paragraph (b) (relevant franked investment income) there shall be substituted--

" (b) the franked investment income of, and foreign income dividends arising to, the company which are referable to its basic life assurance and general annuity business. "

(3) In subsection (8) (interpretation) the definition of "relevant franked investment income" shall cease to have effect.

(4) This paragraph has effect in relation to distributions made on or after 2nd July 1997.

Section 432E of the Taxes Act 1988

2 (1) In section 432E of the Taxes Act 1988 (section 432B apportionment: participating funds) paragraph (b) of subsection (6) (which provides for the adjustment of the net amount referable to overseas life assurance business) shall cease to have effect.

(2) This paragraph has effect in relation to distributions made on or after 2nd July 1997.

Section 434 of the Taxes Act 1988

3 (1) Section 434 of the Taxes Act 1988 (franked investment income etc) shall be amended as follows.

(2) For subsection (1) (nothing in section 208 prevents franked investment income or foreign income dividends from being taken into account in computations made for the purposes of section 89(7) of the [1989 c. 26.] Finance Act 1989 or section 76(2)) there shall be substituted--

" (1) Section 208 shall not apply in relation to--

(a) the charge to corporation tax on the life assurance profits of an insurance company computed in accordance with the provisions of this Act applicable to Case I of Schedule D; or

(b) any computation of such profits in accordance with those provisions.

(1A) Paragraph 2 of Schedule F shall not have effect for the purposes of subsection (1)(a) or (b) above, but this subsection shall not apply in relation to distributions in respect of which an insurance company is entitled to a tax credit under section 441A.

(1B) The reference in subsection (1) above to the life assurance profits of an insurance company is a reference to the profits of the company--

(a) in respect of its life assurance business; or

(b) in respect of any category of life assurance business which it carries on. "

(3) In subsection (3) (certain franked investment income not to be used to frank distributions but may be the subject of claim under section 242) the words from "but it may be the subject of a claim" onwards shall cease to have effect.

(4) In subsection (8) (which provides amongst other things for the payment of tax credit) the words from "or by payment of tax credit" onwards shall cease to have effect.

(5) Sub-paragraph (2) above has effect in relation to distributions made on or after 2nd July 1997.

(6) Sub-paragraph (3) above has effect for accounting periods beginning on or after 2nd July 1997.

(7) Sub-paragraph (4) above has effect for accounting periods beginning on or after 1st January 1998.

(8) In determining, for the purposes of any claim under section 242 of the Taxes Act 1988 made by virtue of section 434(3) of that Act for an accounting period beginning before 2nd July 1997 and ending on or after that date, the policy holders' share of the franked investment income from investments held in connection with an insurance company's life assurance business, there shall be left out of account any distributions which are made on or after 2nd July 1997.

(9) Any amount which, by virtue of sub-paragraph (8) above, is treated as a surplus of franked investment income for the purposes of any such claim as is mentioned in that sub-paragraph shall be disregarded for the purposes of section 20(4) of this Act.

Section 434A of the Taxes Act 1988

4 (1) In section 434A of the Taxes Act 1988 (computation of losses and limitation on relief) subsection (1) (which falls as a result of new section 434(1) to (1B)) shall cease to have effect.

(2) This paragraph has effect for accounting periods beginning on or after 2nd July 1997.

Section 436 of the Taxes Act 1988

5 (1) In section 436 of the Taxes Act 1988 (pension business: separate charge on profits) in subsection (3), paragraphs (d) and (e) (which make provision, for the purposes of the computation of profits arising from pension business, for group income and non-qualifying distributions to be left out of account) shall cease to have effect.

(2) This paragraph has effect in relation to distributions made on or after 2nd July 1997.

Section 438 of the Taxes Act 1988

6 (1) Section 438 of the Taxes Act 1988 (pension business: exemption from tax) shall be amended as follows.

(2) Subsections (3) and (3AA) (which fall as a result of new section 434(1) to (1B)) shall cease to have effect.

(3) For subsection (4) (which makes provision in relation to the payment of tax credits) there shall be substituted--

" (4) This section shall be disregarded in determining, in relation to an insurance company which is entitled to a tax credit in respect of a distribution, whether the condition in paragraph (a) or (b) of section 231(2) is satisfied. "

(4) Subsection (5) (which falls with the substitution of subsection (4)) shall cease to have effect.

(5) Subsections (6) to (7) (which fall with the repeal of subsections (3), (3AA) and (5) and the substitution of subsection (4)) shall cease to have effect.

(6) Subsection (9) (which falls with the repeal of subsections (6), (6B) and (6E) and the repeal of section 440B(2)) shall cease to have effect.

(7) Sub-paragraphs (2) to (4) above have effect in relation to distributions made on or after 2nd July 1997.

(8) Sub-paragraphs (5) and (6) above have effect for accounting periods beginning on or after 2nd July 1997.

(9) In determining, for the purposes of subsections (6) to (7) of section 438 of the Taxes Act 1988, the franked investment income of, or foreign income dividends arising to, an insurance company for an accounting period beginning before 2nd July 1997 and ending on or after that date, there shall be left out of account any distributions which are made on or after 2nd July 1997.

Section 439B of the Taxes Act 1988

7 (1) In section 439B of the Taxes Act 1988 (life reinsurance business: separate charge on profits) subsection (7) (which falls as a result of new section 434(1) to (1B)) shall cease to have effect.

(2) This paragraph has effect in relation to distributions made on or after 2nd July 1997.

Section 440B of the Taxes Act 1988

8 (1) Section 440B of the Taxes Act 1988 (modifications where tax charged under Case I of Schedule D) shall be amended as follows.

(2) Subsection (1A) (which falls as a result of new section 434(1) to (1B)) shall cease to have effect.

(3) Subsection (2) (which falls with the repeal of section 438(6), (6B) and (6E)) shall cease to have effect.

(4) Sub-paragraph (2) above has effect in relation to distributions made on or after 2nd July 1997.

(5) Sub-paragraph (3) above has effect for accounting periods beginning on or after 2nd July 1997.

Section 441A of the Taxes Act 1988

9 (1) Section 441A of the Taxes Act 1988 (section 441: distributions) shall be amended as follows.

(2) Subsection (1) (which falls as a result of new section 434(1) to (1B)) shall cease to have effect.

(3) In subsection (2), for "such a distribution" there shall be substituted "a distribution in respect of any asset of its overseas life assurance fund".

(4) This paragraph has effect in relation to distributions made on or after 2nd July 1997.

Schedule 19AB to the Taxes Act 1988

10 (1) Schedule 19AB to the Taxes Act 1988 (payments on account of tax credits and deducted tax) shall be amended as follows.

(2) In paragraph 1 (entitlement to certain payments on account) in sub-paragraph (1)--

(a) the words "the aggregate of" shall cease to have effect; and

(b) paragraph (b) (which confers entitlement to payments in respect of tax credits) shall cease to have effect.

(3) In sub-paragraph (7) of that paragraph, as that sub-paragraph has effect apart from the provisions of paragraph 1(6) of Schedule 34 to the [1996 c. 8.] Finance Act 1996--

(a) the words "paid or" shall cease to have effect;

(b) paragraph (b) shall cease to have effect; and

(c) in the words following paragraph (b), the words "or in section 42(5A) of the Management Act" shall cease to have effect.

(4) Sub-paragraph (8) (which falls with the repeal of section 438(6)) shall cease to have effect.

(5) In sub-paragraph (10) (which defines "pension business repayments")--

(a) the words "and payments of tax credits", and

(b) the words "or in section 42(5A) of the Management Act",

shall cease to have effect.

(6) Sub-paragraph (2) above has effect in relation to distributions made on or after 2nd July 1997.

(7) Sub-paragraphs (3) to (5) above have effect for accounting periods beginning on or after 2nd July 1997.

11 (1) Schedule 19AB to the Taxes Act 1988, as it has effect in relation to provisional repayment periods falling in accounting periods ending on or after the day appointed under section 199 of the [1994 c. 9.] Finance Act 1994 for the purposes of Chapter III of Part IV of that Act, shall be amended as follows.

(2) In paragraph 1, in sub-paragraph (7)--

(a) the words "paid or" shall cease to have effect;

(b) paragraph (b) shall cease to have effect; and

(3) In paragraph 3 (repayment with interest of excessive provisional repayments) in sub-paragraph (1A)--

(a) the words "paid or" shall cease to have effect;

(b) the words "or section 42(4) of the Management Act" shall cease to have effect; and

(4) In sub-paragraph (1B) of that paragraph--

(a) the words "payments or" shall cease to have effect; and

(b) paragraph (b) shall cease to have effect.

(5) In sub-paragraph (8) of that paragraph--

(a) the words "paid or" shall cease to have effect; and

(b) paragraph (b) shall cease to have effect.

12 (1) For the purposes of section 121 of the [1993 c. 34.] Finance Act 1993 (repayments and payments to friendly societies), Schedule 19AB to the Taxes Act 1988 shall be deemed to have effect without the amendments made by this Schedule.

(2) In relation to distributions made on or after 6th April 1999, sub-paragraph (1) above shall not prevent Schedule 19AB to the Taxes Act 1988 having effect for the purposes of section 121 of the Finance Act 1993 with the amendments made by this Schedule.

Schedule 19AC to the Taxes Act 1988

13 (1) Schedule 19AC to the Taxes Act 1988 (modification of Taxes Act 1988 in relation to overseas life insurance companies) shall be amended as follows.

(2) Paragraph 2 (which falls with the repeal of paragraph 5B(1) to (3)) shall cease to have effect.

(3) In paragraph 5(1) (which notionally inserts subsections (6A) and (6B) into section 76) the notionally inserted subsection (6B) shall cease to have effect.

(4) In paragraph 5A (which confers entitlement to tax credits on overseas life insurance companies) after sub-paragraph (2) there shall be inserted--

" (3) Nothing in this paragraph shall be taken to confer on an overseas life insurance company any entitlement to make a claim under section 231(3). "

(5) In paragraph 5B (which makes provision similar to section 242) sub-paragraphs (1) to (3) shall cease to have effect.

(6) For sub-paragraph (1) of paragraph 9 (which makes provision similar to section 434(1)) there shall be substituted--

" (1) In section 434, the following subsections shall be treated as inserted after subsection (1B)--

" (1C) The exclusion from section 11(2)(a), (aa) or (ab) of distributions received from companies resident in the United Kingdom shall not apply in relation to--

(a) the charge to corporation tax on the life assurance profits of an overseas life insurance company computed in accordance with the provisions of this Act applicable to Case I of Schedule D; or

(b) any computation of such profits in accordance with those provisions.

(1D) Paragraph 2 of Schedule F shall not have effect for the purposes of subsection (1C)(a) or (b) above, but this subsection shall not apply in relation to distributions in respect of which an overseas life insurance company is entitled to a tax credit under section 441A.

(1E) The reference in subsection (1C) above to the life assurance profits of an overseas life insurance company is a reference to the profits of the company--

(a) in respect of its life assurance business; or

(b) in respect of any category of life assurance business which it carries on. " "

(7) Paragraph 9A (which falls with the repeal of section 434A(1)) shall cease to have effect.

(8) Sub-paragraph (1) of paragraph 10 (which notionally inserts into section 438 a provision similar to section 438(3) and (3AA)) shall cease to have effect.

(9) Sub-paragraph (2) of paragraph 10 (which notionally modifies subsections (6), (6A), (6D) and (6E) of section 438) shall cease to have effect.

(10) Paragraph 10A (which notionally inserts into section 439B a provision similar to section 439B(7)) shall cease to have effect.

(11) In paragraph 11A, sub-paragraph (1) (which notionally inserts into section 441A a provision similar to section 441A(1)) shall cease to have effect.

(12) Paragraph 12(1) (which falls with the repeal of paragraph 5B(1) to (3)) shall cease to have effect.

(13) In paragraph 15, sub-paragraph (1) (which falls with the repeal of paragraph 1(8) of Schedule 19AB) shall cease to have effect.

(14) Sub-paragraphs (2), (3), (5), (7), (9), (12) and (13) above have effect for accounting periods beginning on or after 2nd July 1997.

(15) Sub-paragraphs (4), (6), (8), (10) and (11) above have effect in relation to distributions made on or after 2nd July 1997.

(16) In determining, for the purposes of paragraph 5B(1) to (3) of Schedule 19AC to the Taxes Act 1988, the UK distribution income of an overseas life insurance company for an accounting period beginning before 2nd July 1997 and ending on or after that date, there shall be left out of account any distributions which are made on or after 2nd July 1997.

(17) In determining, for the purposes of subsections (6) to (7) of section 438 of the Taxes Act 1988 (as notionally amended by paragraph 10(2) of Schedule 19AC to that Act), the UK distribution income of, or foreign income dividends arising to, an overseas life insurance company for an accounting period beginning before 2nd July 1997 and ending on or after that date, there shall be left out of account any distributions which are made on or after 2nd July 1997.

Section 89 of the Finance Act 1989

14 (1) Section 89 of the [1989 c. 26.] Finance Act 1989 (policy holders' share of profits) shall be amended as follows.

(2) In subsection (2)--

(a) paragraph (a) (which provides for Case I profits to be reduced by unrelieved franked investment income in respect of which an election under section 438(6) has been made) shall cease to have effect;

(b) in paragraph (b) (which provides for Case I profits to be reduced by the shareholders' share of any other unrelieved franked investment income from investments held in connection with life assurance business)--

(i) the words "other unrelieved" shall cease to have effect; and

(ii) for "from investments held in connection with the company's life assurance business" there shall be substituted "which is referable to the company's basic life assurance and general annuity business"; and

(c) in paragraph (c) (which provides for Case I profits to be reduced by the shareholders' share of foreign income dividends in respect of such investments) for "in respect of investments held in connection with the company's life assurance business" there shall be substituted "which are referable to the company's basic life assurance and general annuity business".

(3) Subsection (8) (meaning of "unrelieved" franked investment income) shall cease to have effect.

(4) This paragraph has effect in relation to distributions made on or after 2nd July 1997.

Section 65 of the Finance (No.2) Act 1992

15 In section 65 of the [1992 c. 48.] Finance (No.2) Act 1992 (life assurance business: I minus E) in subsection (2) (meaning of relevant provisions) before paragraph (a) there shall be inserted--

" (aa) section 434(1) and (1A) of the Taxes Act 1988 (section 208 not to apply in relation to life assurance profits computed in accordance with Case I of Schedule D etc);

(ab) section 434(1C) and (1D) of the Taxes Act 1988 (which makes corresponding provision in relation to overseas life insurance companies and is notionally inserted by paragraph 9(1) of Schedule 19AC to that Act); " .

Section 34.

SCHEDULE 4 Tax credits, taxation of distributions etc

Part I General

The Taxes Management Act 1970

Section 7

1 (1) In section 7 of the [1970 c. 9.] Taxes Management Act 1970 (notice of liability to income tax and capital gains tax) in subsection (6) (sources of income which fall within that subsection) after the words "other than the basic rate" there shall be inserted ", the Schedule F ordinary rate".

(2) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

Section 42 (pre-corporation tax self-assessment version)

2 (1) In section 42 of the Taxes Management Act 1970 (procedure for making claims), as it has effect in relation to corporation tax for accounting periods ending before the day appointed under section 199 of the [1994 c. 9.] Finance Act 1994, the following provisions shall cease to have effect--

(a) in subsection (5) (form of claim) the words "Subject to subsection (5A) below,";

(b) subsection (5A) (claims by companies for payment of tax credits); and

(2) This paragraph has effect in relation to tax credits in respect of distributions made on or after 6th April 1999.

Section 42 (corporation tax self-assessment version)

3 (1) In section 42 of the Taxes Management Act 1970 (procedure for making claims), as it has effect in relation to corporation tax for accounting periods ending on or after the day appointed under section 199 of the Finance Act 1994, the following provisions shall cease to have effect--

(a) subsections (4) and (4A) (claims by companies for payment of tax credits); and

(b) in subsection (5), the words from "and the reference in subsection (4) above" onwards.

(2) This paragraph has effect in relation to tax credits in respect of distributions made on or after 6th April 1999.

The Taxes Act 1988

Section 231

4 (1) In section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions) in subsection (1) (whose provisions are expressed to be subject to sections 247 and 441A) for "441A" there shall be substituted "469(2A)".

(2) This paragraph has effect in relation to distributions made on or after 6th April 1999.

Section 232

5 (1) In section 232 of the Taxes Act 1988 (tax credits for non-UK residents) the following provisions shall cease to have effect--

(a) subsection (2) (funds to which section 615(2)(b) or (c) applies); and

(b) subsection (3) (sovereign powers, governments and international organisations).

(2) This paragraph has effect in relation to distributions made on or after 6th April 1999.

Section 233

6 (1) Section 233 of the Taxes Act 1988 (taxation of certain recipients of distributions and in respect of non-qualifying distributions) shall be amended as follows.

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