Finance Act 1998 (c. 36) (c. 36)

(The document as of February, 2008)

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21 (1) Section 252 of the Taxes Act 1988 (rectification of excessive set-off of ACT or tax credit) shall be amended as follows.

(2) In subsection (1), paragraph (a) (which concerns the set-off of ACT) shall cease to have effect.

(3) This paragraph has effect in relation to accounting periods beginning on or after 6th April 1999.

Section 253 of the Taxes Act 1988

22 (1) Section 253 of the Taxes Act 1988 (power to modify or replace section 234(5) to (9) and Schedule 13) shall be amended as follows.

(2) In subsection (1)--

(a) paragraph (b), and

(b) the words "and to Schedule 13",

shall cease to have effect.

(3) Subsection (2) (which concerns ACT) shall cease to have effect.

(4) In subsection (3)(a) (which contains a reference to ACT) the words "advance corporation tax or" shall cease to have effect.

(5) This paragraph has effect in relation to accounting periods beginning on or after 6th April 1999.

Section 255 of the Taxes Act 1988

23 (1) Section 255 of the Taxes Act 1988 ("gross rate" and "gross amount" of distributions to include ACT) shall cease to have effect.

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

Section 419 of the Taxes Act 1988

24 (1) Section 419 of the Taxes Act 1988 (loans to participators etc) shall be amended as follows.

(2) In subsection (1) (charge at rate of ACT) for the words from "such proportion" onwards there shall be substituted "25 per cent. of the amount of the loan or advance".

(3) In subsection (4) (relief in case of repayment of loan or advance)--

(a) after "subsection (1) above and" there shall be inserted "(a)";

(b) after "is repaid to the company," there shall be inserted " or

(b) the whole or part of the debt in respect of the loan or advance is released or written off, " ; and

(4) In subsection (4A) (provision in relation to relief under subsection (4))--

(a) after "Where" there shall be inserted "(a)";

(b) after "that loan or advance," there shall be inserted " or

(b) the release or writing off of the whole or any part of the debt in respect of a loan or advance occurs on or after the day on which tax by virtue of this section becomes due in relation to that loan or advance, " ; and

(c) after "repayment", in the second and third places where it occurs, there shall be inserted ", release or writing off".

(5) Sub-paragraph (2) above has effect in relation to loans or advances made on or after 6th April 1999.

(6) Sub-paragraphs (3) and (4) above have effect in relation to the release or writing off of the whole or part of a debt on or after 6th April 1999.

Section 434 of the Taxes Act 1988

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

(2) Subsection (3) (certain franked investment income not to be used to frank distributions) shall cease to have effect.

(3) Subsection (6) (which makes provision in relation to section 239) shall cease to have effect.

(4) Subsection (8) (which applies where subsection (3) or (6) of section 434 applies) shall cease to have effect.

(5) Sub-paragraph (2) above has effect in relation to franked investment income which is attributable to distributions made on or after 6th April 1999.

(6) Sub-paragraphs (3) and (4) above have effect in relation to accounting periods beginning on or after 6th April 1999.

Section 434C of the Taxes Act 1988

26 (1) Section 434C of the Taxes Act 1988 (interest on repayment of ACT) shall cease to have effect.

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

Section 468Q of the Taxes Act 1988

27 (1) Section 468Q of the Taxes Act 1988 (dividend distribution to corporate unit holder) shall be amended as follows.

(2) In subsection (3) (as amended by paragraph 8(6)(b) of Schedule 6 to the [1997 c. 58.] Finance (No. 2) Act 1997)--

(a) for the definition of "C" there shall be substituted--

" C = such amount of the gross income as does not derive from franked investment income, as reduced by an amount equal to the trustees' net liability to corporation tax in respect of the gross income; " ; and

(b) for the definition of "D" there shall be substituted--

" D = the amount of the gross income, as reduced by an amount equal to the trustees' net liability to corporation tax in respect of the gross income; " .

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

" (3A) Any reference in this section to the trustees' net liability to corporation tax in respect of the gross income is a reference to the amount of the liability of the trustees of the authorised unit trust to corporation tax in respect of that gross income less the amount (if any) of any reduction of that liability which is given or falls to be given in accordance with any arrangements having effect by virtue of section 788 or by way of a credit under section 790(1). "

(4) After subsection (5) there shall be inserted--

" (5A) Where, in relation to a dividend distribution, any tax is deemed to have been deducted by virtue of the application of subsection (2)(b) above, the amount to which the unit holder is entitled by way of repayment of that tax shall not exceed the amount of the unit holder's portion of the trustees' net liability to corporation tax in respect of the gross income.

(5B) For the purposes of subsection (5A) above the unit holder's portion shall be determined by reference to the proportions in which unit holders have rights in the authorised unit trust in the distribution period in question.

(5C) The trustees of the authorised unit trust shall in the appropriate statement sent to the unit holder under section 234A include a statement showing their net liability to corporation tax in respect of the gross income. "

(5) This paragraph has effect in relation to distribution periods beginning on or after 6th April 1999.

Section 490 of the Taxes Act 1988

28 (1) Section 490 of the Taxes Act 1988 (companies carrying on a mutual business or not carrying on a business) shall be amended as follows.

(2) In subsection (1) the words "(including group income)" shall cease to have effect.

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

Section 497 of the Taxes Act 1988

29 (1) Section 497 of the Taxes Act 1988 (restriction on setting ACT against income from oil extraction activities etc) shall cease to have effect.

(2) This paragraph has effect in relation to accounting periods beginning on or after 6th April 1999.

Section 498 of the Taxes Act 1988

30 (1) Section 498 of the Taxes Act 1988 (limited right to carry back surrendered ACT) shall cease to have effect.

(2) Sub-paragraph (1) above has effect in relation to accounting periods of the surrendering company (as defined in section 240(1) of the Taxes Act 1988) beginning on or after 6th April 1999.

(3) The limit under section 498(5) of the Taxes Act 1988 for an accounting period of the surrendering company (as defined in section 240(1) of that Act) beginning before, and ending on or after, 6th April 1999 (a "straddling period") shall be determined as if--

(a) the straddling period were an accounting period beginning at the beginning of the straddling period and ending on 5th April 1999 ("the notional period"); and

(b) there were apportioned to the notional period a proportionate amount of the limit which, apart from this sub-paragraph, would apply for the purposes of section 498(5) of the Taxes Act 1988.

Section 499 of the Taxes Act 1988

31 (1) Section 499 of the Taxes Act 1988 (surrender of ACT where oil extraction company etc owned by a consortium) shall cease to have effect.

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

Section 703 of the Taxes Act 1988

32 (1) Section 703 of the Taxes Act 1988 (cancellation of tax advantage) shall be amended as follows.

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

" (3A) The amount of income tax which may be specified in an assessment which is made under subsection (3) above to counteract a tax advantage--

(a) obtained by a person in circumstances falling within paragraph D or paragraph E of section 704, and

(b) consisting of the avoidance of a charge to income tax,

shall not exceed the amount of income tax for which that person would be liable in respect of the receipt, on the date on which the consideration mentioned in paragraph D or paragraph E of section 704 is received, of a qualifying distribution of an amount equal to the amount or value of that consideration. "

(3) Subsections (4) to (6) (which make provision in relation to treating of amounts of ACT as paid) shall cease to have effect.

(4) Sub-paragraph (2) above has effect in relation to assessments under section 703(3) of the Taxes Act 1988 made on or after 6th April 1999.

(5) Sub-paragraph (3) above has effect for the year 1999-00 and subsequent years of assessment.

Section 704 of the Taxes Act 1988

33 (1) Section 704 of the Taxes Act 1988 (the prescribed circumstances) shall be amended as follows.

(2) In paragraph A, sub-paragraph (d) (which relates to ACT) shall cease to have effect.

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

Section 705 of the Taxes Act 1988

34 (1) Section 705 of the Taxes Act 1988 (appeals against Board's notices under section 703) shall be amended as follows.

(2) Subsections (6) to (8) (which make provision supplemental to section 703(5) and (6)) shall cease to have effect.

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

Section 797 of the Taxes Act 1988

35 (1) Section 797 of the Taxes Act 1988 (limits on credit: corporation tax) shall be amended as follows.

(2) Sub-paragraphs (4) and (5) (which make provision in relation to section 239) shall cease to have effect.

(3) This paragraph has effect in relation to accounting periods beginning on or after 6th April 1999.

Section 802 of the Taxes Act 1988

36 (1) Section 802 of the Taxes Act 1988 (UK insurance companies trading overseas) shall be amended as follows.

(2) In subsection (2)(a) the words "and group income" shall cease to have effect.

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

Section 813 of the Taxes Act 1988

37 (1) Section 813 of the Taxes Act 1988 (recovery of tax credits incorrectly paid) shall be amended as follows.

(2) In subsection (6), paragraph (b) (which makes provision in relation to ACT) shall cease to have effect.

(3) This paragraph has effect in relation to accounting periods beginning on or after 6th April 1999.

Section 826 of the Taxes Act 1988

38 (1) Section 826 of the Taxes Act 1988 (interest on tax overpaid) shall be amended as follows.

(2) Subsection (2A) (material date for ACT) shall cease to have effect.

(3) Subsection (7) (which makes provision in relation to surplus ACT) shall cease to have effect.

(4) Subsections (7AA) and (7CA) (which make further provision in relation to surplus ACT) shall cease to have effect.

(5) Sub-paragraph (2) above has effect in relation to accounting periods beginning on or after 6th April 1999.

(6) Sub-paragraph (3) above has effect where the later period mentioned in subsection (7) of section 826 begins on or after 6th April 1999.

(7) Sub-paragraph (4) above has effect where the earlier period mentioned in subsections (7AA) and (7CA) of section 826 begins on or after 6th April 1999.

Section 832 of the Taxes Act 1988

39 (1) Section 832 of the Taxes Act 1988 (interpretation of the Tax Acts) shall be amended as follows.

(2) In subsection (1) for the definition of "franked investment income" there shall be substituted--

" "franked investment income" means income of a company resident in the United Kingdom which consists of a distribution in respect of which the company is entitled to a tax credit (and which accordingly represents income equal to the aggregate of the amount or value of the distribution and the amount of that credit); " .

(3) In subsection (1) the definition of "franked payment" shall cease to have effect.

(4) In subsection (1) the definition of "group income" shall cease to have effect.

(5) In subsection (1) the definition of "the rate of advance corporation tax" shall cease to have effect.

(6) In subsection (1) the definition of "surplus of franked investment income" shall cease to have effect.

(7) After subsection (4) there shall be inserted--

" (4A) Any reference in the Tax Acts to franked investment income received by a company apply to any such income received by another person on behalf of or in trust for the company, but not to any such income received by the company on behalf of or in trust for another person. "

(8) Sub-paragraphs (2), (3), (6) and (7) above have effect in relation to accounting periods beginning on or after 6th April 1999.

(9) Sub-paragraphs (4) and (5) above have effect in relation to distributions made on or after 6th April 1999.

Section 835 of the Taxes Act 1988

40 (1) Section 835 of the Taxes Act 1988 ("total income" in the Income Tax Acts) shall be amended as follows.

(2) In subsection (6), in paragraph (a) (which refers to an amount equal to a tax credit calculated by reference to the rate of ACT in force for any year) for the words from "amount" to "for any year" there shall be substituted "amount which is equal to a tax credit calculated by reference to the tax credit fraction".

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

Schedule 13 to the Taxes Act 1988

41 (1) Schedule 13 to the Taxes Act 1988 (collection of ACT) shall cease to have effect.

(2) This paragraph has effect--

(a) in relation to return periods beginning on or after 6th April 1999; and

(b) in relation to accounting periods beginning on or after that date.

Schedule 13A to the Taxes Act 1988

42 (1) Schedule 13A to the Taxes Act 1988 (surrenders of ACT) shall cease to have effect.

(2) This paragraph has effect in relation to accounting periods of the surrendering company (as defined in section 240(1) of the Taxes Act 1988) beginning on or after 6th April 1999.

Schedule 24 to the Taxes Act 1988

43 (1) Schedule 24 to the Taxes Act 1988 (assumptions in relation to controlled foreign companies etc) shall be amended as follows.

(2) In paragraph 6--

(a) in sub-paragraph (1), paragraph (a) (which makes provision in relation to section 247(1)) shall cease to have effect; and

(b) in sub-paragraph (2), the words "dividends or" shall cease to have effect.

(3) Paragraph 7 (which makes provision in relation to section 240) shall cease to have effect.

(4) This paragraph has effect in relation to accounting periods of companies resident outside the United Kingdom which begin on or after 6th April 1999.

Schedule 26 to the Taxes Act 1988

44 (1) Schedule 26 to the Taxes Act 1988 (controlled foreign companies: relief against liability for tax in respect of chargeable profits) shall be amended as follows.

(2) Paragraph 2 (which makes provision in relation to ACT) shall cease to have effect.

(3) Sub-paragraphs (1) and (2) above have effect in relation to accounting periods beginning on or after 6th April 1999.

(4) The relevant maximum (as defined in paragraph 2(3) of Schedule 26 to the Taxes Act 1988) for an accounting period beginning before, and ending on or after, 6th April 1999 (a "straddling period") shall be determined as if--

(a) the straddling period were an accounting period beginning at the beginning of the straddling period and ending on 5th April 1999 ("the notional period"); and

(b) there were apportioned to the notional period a proportionate amount of the amounts mentioned in paragraph 2(3)(a) and (b) of Schedule 26 to the Taxes Act 1988.

Paragraph 8 of Schedule 4 to the Finance (No. 2) Act 1997

45 Paragraph 8 of Schedule 4 to the [1997 c. 58.] Finance (No. 2) Act 1997 (which prospectively amends section 238(1) of the Taxes Act 1988) shall not have effect.

Paragraph 9 of Schedule 4 to the Finance (No. 2) Act 1997

46 Paragraph 9 of Schedule 4 to the [1997 c. 58.] Finance (No. 2) Act 1997 (which prospectively amends section 241 of the Taxes Act 1988) shall not have effect.

Paragraph 18 of Schedule 4 to the Finance (No. 2) Act 1997

47 Paragraph 18 of Schedule 4 to the [1997 c. 58.] Finance (No. 2) Act 1997 (which prospectively amends section 703 of the Taxes Act 1988) shall not have effect.

Paragraph 23 of Schedule 4 to the Finance (No. 2) Act 1997

48 Paragraph 23 of Schedule 4 to the [1997 c. 58.] Finance (No. 2) Act 1997 (which prospectively amends Schedule 13 to the Taxes Act 1988) shall not have effect.

Section 35.

SCHEDULE 4 Interest payable under the Tax Acts by or to companies

Interest on overpaid or early paid corporation tax

1 (1) In section 826(2) of the Taxes Act 1988 (which defines "the material date" for the purposes of interest on overpaid corporation tax) at the beginning there shall be inserted "Subject to section 826A(2),".

(2) After section 826 of the Taxes Act 1988 there shall be inserted--

" 826A Interest on payments in respect of corporation tax and meaning of "the material date".

(1) The Treasury may by regulations make provision applying section 826, with such modifications as may be prescribed, for the purpose of conferring on companies of such descriptions as may be prescribed a right to interest--

(a) on such payments made by them in respect of corporation tax as may be prescribed,

(b) at the rate applicable under section 178 of the [1989 c. 26.] Finance Act 1989, and

and for treating any such interest for the purposes, or prescribed purposes, of the Tax Acts as interest under section 826(1)(a) on a repayment of corporation tax.

(2) The Treasury may by regulations make provision modifying section 826(2) in relation to companies of such description as may be prescribed.

(3) Subsections (1) and (2) above do not apply in relation to companies in relation to which section 826(2) is modified or otherwise affected by regulations under section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) in relation to the accounting period to which the corporation tax in question relates.

(4) Where the Treasury make regulations under subsection (2) above in relation to companies of any description, they may also make regulations modifying section 59DA(2) of the Management Act in relation to those companies, or any description of such companies, by varying the date before which the claim there mentioned may not be made.

(5) Regulations under this section--

(a) may make different provision in relation to different cases or circumstances or in relation to companies or accounting periods of different descriptions;

(b) may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient.

(6) Regulations under this section may not make provision in relation to accounting periods ending before 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 (corporation tax self-assessment).

(7) In this section "prescribed" means prescribed by regulations made under this section. "

(3) In section 178 of the [1989 c. 26.] Finance Act 1989 (setting of rates of interest) in subsection (2)(m) (which lists the provisions of the Taxes Act 1988 to which the section applies) for "and 826" there shall be substituted "826 and 826A(1)(b)".

The "material date" for interest on a repayment of income tax

2 (1) In section 826 of the Taxes Act 1988 (interest on tax overpaid) in subsection (3) (date from which interest runs on a repayment of income tax, or a payment of tax credit, to a company) for the words from "the material date is" to "for the accounting period" there shall be substituted "the material date is the day after the end of the accounting period".

(2) This paragraph has effect in relation to 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 (corporation tax self-assessment).

Recovery of interest overpaid under section 826(1)(a)

3 (1) In section 826 of the Taxes Act 1988 (interest on tax overpaid) after subsection (8) there shall be inserted--

" (8A) Where--

(a) interest has been paid to a company under subsection (1)(a) above,

(b) there is a change in the company's assessed liability to corporation tax, other than a change which in whole or in part corrects an error made by the Board or an officer of the Board, and

(c) as a result only of that change (and, in particular, not as a result of any error in the calculation of the interest), it appears to an officer of the Board that the interest ought not to have been paid, either at all or to any extent,

the interest that ought not to have been paid may be recovered from the company as if it were interest charged under Part IX of the Management Act (interest on overdue tax).

(8B) For the purposes of subsection (8A) above, the cases where there is a change in a company's assessed liability to corporation tax are those cases where--

(a) an assessment, or an amendment of an assessment, of the amount of corporation tax payable by the company for the accounting period in question is made, or

(b) a determination of that amount is made under paragraph 36 or 37 of Schedule 18 to the Finance Act 1998 (which until superseded by a self-assessment under that Schedule has effect as if it were one),

whether or not any previous assessment or determination has been made.

(8C) In subsection (8A)(b) above "error" includes--

(a) any computational error; and

(b) the allowance of a claim or election which ought not to have been allowed. "

(2) In section 69 of the [1970 c. 9.] Taxes Management Act 1970 (which provides for the recovery of certain interest on tax etc as if it were tax due and payable etc)--

(a) in the words preceding paragraph (a), after "interest charged under Part IX of this Act" there shall be inserted "or recoverable under section 826(8A) of the principal Act as if it were interest so charged"; and

(b) in the words following paragraph (c), after "interest, on tax which is not in fact assessed," there shall be inserted "or if it is interest recoverable under section 826(8A) of the principal Act,".

(3) The amendments made by this paragraph have effect in relation to interest on repayments of corporation tax paid for 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 (corporation tax self-assessment).

Interest on underpaid tax where reliefs are carried back

4 (1) Section 87A of the [1970 c. 9.] Taxes Management Act 1970 (interest on overdue corporation tax etc) shall be amended as follows.

(2) In each of subsections (4), (4A) and (6) (which refer to corporation tax becoming due and payable as mentioned in subsection (1) of that section) for the words "as mentioned in subsection (1) above" there shall be substituted "as mentioned in subsection (8) below".

(3) After subsection (7) there shall be inserted--

" (8) In subsections (4), (4A) and (6) above, any reference to the date on which corporation tax for an accounting period became, or would have become, due and payable shall be construed on the basis that corporation tax for an accounting period becomes due and payable on the day following the expiry of nine months from the end of the accounting period. "

(4) After subsection (8) there shall be inserted--

" (9) The power conferred by section 59E of this Act (alteration of date on which corporation tax becomes due and payable) does not include power to make provision in relation to subsection (4), (4A), (6) or (8) above the effect of which would be to change the meaning of references in subsection (4), (4A) or (6) above to the date on which corporation tax for an accounting period became, or would have become, due and payable (as mentioned in subsection (8) above). "

(5) The amendments made by this paragraph have effect where the accounting period whose due and payable date falls to be determined is an accounting period 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 (corporation tax self-assessment).

(6) In sub-paragraph (5) above "due and payable date", in relation to an accounting period, means the date on which corporation tax for that period becomes, or (as the case may be) would become, due and payable.

Interest on overpaid tax where reliefs are carried back

5 (1) Section 826 of the Taxes Act 1988 (interest on tax overpaid) shall be amended as follows.

(2) In each of subsections (7), (7A), (7B) and (7C) (which refer to corporation tax becoming due and payable as mentioned in subsection (2) of that section) for the words "as mentioned in subsection (2) above" there shall be substituted "as mentioned in subsection (7D) below".

(3) After subsection (7CA) there shall be inserted--

" (7D) In subsections (7), (7A), (7B) and (7C) above, any reference to the date on which corporation tax for an accounting period became, or would have become, due and payable shall be construed on the basis that corporation tax for an accounting period becomes due and payable on the day following the expiry of nine months from the end of the accounting period. "

(4) After subsection (7D) there shall be inserted--

" (7E) The power conferred by section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) does not include power to make provision in relation to subsection (7), (7A), (7B), (7C) or (7D) above the effect of which would be to change the meaning of references in subsection (7), (7A), (7B) or (7C) above to the date on which corporation tax for an accounting period became, or would have become, due and payable (as mentioned in subsection (7D) above). "

Company liquidations

6 (1) Section 342 of the Taxes Act 1988 (tax on company in liquidation) shall be amended as follows.

(2) In subsection (2) (corporation tax charge on profits of final year etc) after "Subject to subsection (3)" there shall be inserted "or (3A)".

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

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