Finance Act 1999 (c. 16)

(The document as of February, 2008)

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Amendment of Value Added Tax Act 1994

1 (1) Section 43 of the [1994 c. 23.] Value Added Tax Act 1994 (groups of companies) shall be amended as follows.

(2) In subsection (1), for the words "the following provisions of this section" there shall be substituted the words "sections 43A to 43C".

(3) Subsections (3) to (8) shall cease to have effect.

2 The following shall be inserted after section 43 of the Value Added Tax Act 1994--

" 43A Groups: eligibility

(1) Two or more bodies corporate are eligible to be treated as members of a group if each is established or has a fixed establishment in the United Kingdom and--

(a) one of them controls each of the others,

(b) one person (whether a body corporate or an individual) controls all of them, or

(2) For the purposes of this section a body corporate shall be taken to control another body corporate if it is empowered by statute to control that body's activities or if it is that body's holding company within the meaning of section 736 of the [1985 c. 6.] Companies Act 1985.

(3) For the purposes of this section an individual or individuals shall be taken to control a body corporate if he or they, were he or they a company, would be that body's holding company within the meaning of that section.

43B Groups: applications

(1) This section applies where an application is made to the Commissioners for two or more bodies corporate, which are eligible under section 43A(1), to be treated as members of a group.

(2) This section also applies where two or more bodies corporate are treated as members of a group and an application is made to the Commissioners--

(a) for another body corporate, which is eligible under section 43A(1) to be treated as a member of the group, to be treated as a member of the group,

(b) for a body corporate to cease to be treated as a member of the group,

(d) for the bodies corporate no longer to be treated as members of a group.

(3) An application with respect to any bodies corporate--

(a) must be made by one of them or by the person controlling them, and

(b) in the case of an application for the bodies to be treated as a group, must appoint one of them as the representative member.

(4) Where this section applies in relation to an application it shall, subject to subsection (6) below, be taken to be granted with effect from--

(a) the day on which the application is received by the Commissioners, or

(b) such earlier or later time as the Commissioners may allow.

(5) The Commissioners may refuse an application, within the period of 90 days starting with the day on which it was received by them, if it appears to them--

(a) in the case of an application such as is mentioned in subsection (1) above, that the bodies corporate are not eligible under section 43A(1) to be treated as members of a group,

(b) in the case of an application such as is mentioned in subsection (2)(a) above, that the body corporate is not eligible under section 43A(1) to be treated as a member of the group, or

(6) If the Commissioners refuse an application it shall be taken never to have been granted.

43C Groups: termination of membership

(1) The Commissioners may, by notice given to a body corporate, terminate its treatment as a member of a group from a date--

(a) which is specified in the notice, and

(b) which is, or falls after, the date on which the notice is given.

(2) The Commissioners may give a notice under subsection (1) above only if it appears to them to be necessary for the protection of the revenue.

(3) Where--

(a) a body is treated as a member of a group, and

(b) it appears to the Commissioners that the body is not, or is no longer, eligible under section 43A(1) to be treated as a member of the group,

the Commissioners shall, by notice given to the body, terminate its treatment as a member of the group from a date specified in the notice.

(4) The date specified in a notice under subsection (3) above may be earlier than the date on which the notice is given but shall not be earlier than--

(a) the first date on which, in the opinion of the Commissioners, the body was not eligible to be treated as a member of the group, or

(b) the date on which, in the opinion of the Commissioners, the body ceased to be eligible to be treated as a member of the group. "

3 For section 83(k) of the [1994 c. 23.] Value Added Tax Act 1994 (appeals) there shall be substituted--

" (k) the refusal of an application such as is mentioned in section 43B(1) or (2);

(ka) the giving of a notice under section 43C(1) or (3); " .

4 After section 84(4) of the Value Added Tax Act 1994 (appeals: supplementary) there shall be inserted--

" (4A) Where an appeal is brought against the refusal of an application such as is mentioned in section 43B(1) or (2) on the grounds stated in section 43B(5)(c)--

(a) the tribunal shall not allow the appeal unless it considers that the Commissioners could not reasonably have been satisfied that there were grounds for refusing the application,

(b) the refusal shall have effect pending the determination of the appeal, and

(4B) Where an appeal is brought against the giving of a notice under section 43C(1) or (3)--

(a) the notice shall have effect pending the determination of the appeal, and

(b) if the appeal is allowed, the notice shall be deemed never to have had effect.

(4C) Where an appeal is brought against the giving of a notice under section 43C(1), the tribunal shall not allow the appeal unless it considers that the Commissioners could not reasonably have been satisfied that there were grounds for giving the notice.

(4D) Where--

(a) an appeal is brought against the giving of a notice under section 43C(3), and

(b) the grounds of appeal relate wholly or partly to the date specified in the notice,

the tribunal shall not allow the appeal in respect of the date unless it considers that the Commissioners could not reasonably have been satisfied that it was appropriate. "

5 (1) Schedule 9A to the Value Added Tax Act 1994 (groups: anti-avoidance) shall be amended as follows.

(2) At the end of paragraph 2 (which becomes sub-paragraph (1) of that paragraph) there shall be inserted--

" (2) This paragraph shall not apply where the relevant event is the termination of a body corporate's treatment as a member of a group by a notice under section 43C(1) or (3). "

(3) In paragraph 3(8), for the words "under section 43" there shall be substituted "such as is mentioned in section 43B".

(4) In paragraph 7(1), for the words "section 43" there shall be substituted "sections 43 to 43C".

Transitional provisions

6 (1) In this paragraph--

"the old law" means sections 43, 83 and 84 of, and Schedule 9A to, the [1994 c. 23.] Value Added Tax Act 1994 as they have effect without the amendments in paragraphs 1 to 5 of this Schedule, and
"the new law" means sections 43 to 43C, 83 and 84 of, and Schedule 9A to, that Act as they have effect by virtue of paragraphs 1 to 5 of this Schedule.

(2) Where, immediately before this Schedule comes into force, two or more bodies corporate are treated as members of a group by virtue of the old law--

(a) they shall continue to be treated as members of a group, and

(b) in their treatment as members of a group after this Schedule comes into force, they shall be treated as if any application under the old law by virtue of which they are treated as members of a group had been an equivalent application under the new law.

(3) Where an application under section 43 of the Value Added Tax Act 1994 is received by the Commissioners, and has neither taken effect nor been refused before the day on which this Act is passed, the old law shall apply to determine whether the application is to take effect; but where it is determined under this sub-paragraph that an application is to take effect--

(a) it shall be treated as if it were an equivalent application under the new law, and

(b) it shall be taken to have been granted under the new law at the time when it would have taken effect in accordance with the old law.

(4) In a case to which sub-paragraph (2) or (3) above applies, the power under section 43C(3) shall not be used to terminate the treatment of a body corporate as a member of a group--

(a) on the ground that the body corporate is not established, and does not have a fixed establishment, in the United Kingdom, and

(b) from a date before 1st January 2000.

(5) Where an application which purports to be an application under the old law is received by the Commissioners after the day on which this Act is passed--

(a) it shall be treated as if it were an application under the new law, and

(b) section 43B of the new law shall apply notwithstanding any provision in the application for a date from which it is to take effect.

Section 30.

SCHEDULE 3 New Schedule 13B to the Taxes Act 1988

The Schedule inserted after Schedule 13A to the Taxes Act 1988 is as follows--

" Schedule 13B Children's Tax Credit

Child living with more than one adult: married and unmarried couples

1 (1) Paragraphs 2 to 5 below apply where at any time in a year of assessment--

(a) a husband and wife are living together or a man and a woman are living together as husband and wife, and

(b) a relevant child is resident with them.

(2) In those paragraphs--

(a) the husband and wife, or the man and the woman, are referred to as the partners,

(b) "the higher-earning partner" means the partner who has the higher total income for the year of assessment,

(d) "relevant child" means a child who is a qualifying child in relation to both partners.

(3) If the partners have the same total income for the year--

(a) they may elect that one of them be treated for the purposes of paragraphs 2 to 5 below as the lower-earning partner, and

(b) if they do not make an election, neither shall be entitled to a children's tax credit for the year in respect of a relevant child.

2 Subject to paragraph 3 below, the lower-earning partner shall not be entitled to a children's tax credit for the year in respect of a relevant child.

3 (1) This paragraph applies if no part of either partner's income for the year falls within section 1(2)(b).

(2) If the lower-earning partner makes a claim for a children's tax credit for the year in respect of a relevant child--

(a) paragraph 2 above shall not apply, and

(b) in calculating the credit for each partner, the amount mentioned in section 257AA(2) shall be halved.

(3) If the partners make an election under this sub-paragraph--

(a) paragraph 2 above shall not apply, and

(b) the higher-earning partner shall not be entitled to a children's tax credit for the year in respect of a relevant child.

4 (1) This paragraph applies where--

(a) a partner is entitled to a children's tax credit for a year of assessment,

(b) the amount by reference to which his credit falls to be calculated (Amount A) exceeds the amount which would be necessary, in accordance with section 256(2), to reduce his liability for the year to income tax on his total income to nil (Amount B), and

(2) Where the other partner would not, by virtue of paragraph 2 or 3 above, be entitled to a children's tax credit for the year in respect of a relevant child--

(a) he shall be entitled to a children's tax credit in respect of a relevant child notwithstanding that paragraph, and

(b) the amount by reference to which his credit shall be calculated shall be the amount of the difference between Amount A and Amount B.

(3) In any other case, the difference between Amount A and Amount B shall be added to the amount by reference to which children's tax credit would otherwise be calculated for the other partner in respect of a relevant child.

(4) A notice under this paragraph--

(a) must be given on or before the fifth anniversary of the 31st January next following the end of the year of assessment to which it relates,

(b) shall be in such form as the Board may determine, and

5 (1) This paragraph applies to elections under paragraph 3 above.

(2) An election--

(a) shall be made by giving notice to an officer of the Board in such form as the Board may determine, and

(b) may be made so as to have effect for a single year of assessment or for two or more consecutive years.

(3) Subject to sub-paragraph (4) below, an election must be made before the first year of assessment for which it is to have effect and on the basis of assumptions about the partners' incomes for that year.

(4) An election may be made, on the basis of such assumptions, at a time during the first year for which it is to have effect if--

(a) the election is made within the first 30 days of that year and an officer of the Board has been given written notification before that year that the election will be made, or

(b) the partners marry in that year, or

(d) a relevant child becomes resident with the partners in that year and no relevant child has previously in that year been resident with the partners, or

(e) it is assumed that the partner who was the higher-earning partner in the previous year will be the lower-earning partner in that year.

(5) An election may be withdrawn--

(a) by the making of another election which supersedes the first, or

(b) by notice given to an officer of the Board, in such form as the Board may determine, by either partner.

(6) A withdrawal shall have effect for the year of assessment in which it is given and subsequent years.

(7) If the higher-earning partner for one year of assessment (Year 1) is the lower-earning partner for the next year (Year 2), an election having effect for Year 1 shall not have effect for Year 2 or subsequent years.

Child living with more than one adult: other cases

6 (1) This paragraph applies to a child for a year of assessment if--

(a) he is resident with two or more persons at the same time or at different times during the year,

(b) he is a qualifying child in relation to two or more of those persons, and

(2) The persons in relation to whom the child is a qualifying child are referred to in this paragraph as the taxpayers.

(3) None of the taxpayers shall be entitled to a children's tax credit for the year of assessment by virtue of the residence of any child to whom this paragraph applies except in accordance with the following provisions of this paragraph.

(4) If a taxpayer claims a children's tax credit for the year of assessment by virtue of the residence of any child to whom this paragraph applies, for the amount mentioned in section 257AA(2) (before any reduction) there shall be substituted his allotted proportion of that amount.

(5) A taxpayer's allotted proportion is--

(a) such proportion as may be agreed between him and the other taxpayers, or

(b) in default of agreement, a proportion which is assigned to him by the Commissioners.

(6) For the purposes of sub-paragraph (5) above--

(a) a proportion may be 100 per cent.,

(b) the sum of the proportions shall not exceed 100 per cent., and

(c) "the Commissioners" means such body of General Commissioners, being the General Commissioners for a division in which one of the taxpayers resides, as the Board may direct or, if none of the taxpayers resides in the United Kingdom, the Special Commissioners.

(7) Where a person--

(a) is a member of more than one set of taxpayers in relation to whom this paragraph applies for a year of assessment,

(b) has more than one allotted proportion under this paragraph for the year, and

for the amount mentioned in section 257AA(2) (before any reduction) there shall be substituted the aggregate of his allotted proportions of that amount (not exceeding 100 per cent.).

(8) Where--

(a) a taxpayer makes a claim under section 257AA, and

(b) it appears that an allotted proportion will need to be assigned to him under sub-paragraph (5)(b) above for that purpose,

the Board may direct that the claim shall be dealt with, and the assignment shall be made, by a specified body of Commissioners which could be directed under sub-paragraph (6)(c) above to make the assignment; and where a direction is given no other body of Commissioners shall have jurisdiction to determine the claim.

(9) For the purposes of any assignment to a taxpayer under sub-paragraph (5)(b) above--

(a) the Commissioners shall hear and determine the case in the same manner as an appeal, and

(b) any of the taxpayers shall be entitled to appear and be heard by the Commissioners or to make representations to them in writing.

Combined cases

7 (1) This paragraph applies where a child is a relevant child for the purposes of paragraphs 2 to 5 above in a year of assessment and--

(a) he is a relevant child for the year in relation to more than one pair of partners, or

(b) paragraph 6 above would apply to him for the year but for the fact that he is a relevant child for the purposes of paragraphs 2 to 5 above.

(2) Where this paragraph applies--

(a) paragraph 6 above shall apply, but with each pair of partners for the purposes of paragraphs 2 to 5 above being treated as a single taxpayer, and

(b) paragraphs 2 to 5 above shall apply in relation to each pair of partners, taking for the amount mentioned in section 257AA(2) (before any reduction) the amount substituted by virtue of paragraph 6 above.

Change of circumstances

8 (1) For the purposes of this paragraph a change of circumstances occurs in relation to a child in a year of assessment if a relevant event takes place in that year and--

(a) as a result of the event the child becomes a qualifying child in relation to any person or stops being a qualifying child in relation to any person, or

(b) the child is, immediately before the event, a qualifying child in relation to both parties to the event.

(2) The following are relevant events--

(a) a marriage or a man and a woman starting to live together as husband and wife;

(b) a separation.

(3) A separation occurs when--

(a) a husband and wife cease to live together, or

(b) a man and a woman cease to live together as husband and wife, having been living together as husband and wife without being married.

(4) In a year of assessment in which a change of circumstances (or more than one) occurs in relation to a child, section 257AA and paragraphs 2 to 7 above shall apply in relation to the child's residence as if each of the following were a separate year of assessment--

(a) the period ending with the day before the first (or only) change of circumstances,

(b) the period starting with the day of the last (or only) change of circumstances, and

(5) For the purposes of sub-paragraph (4) above the amount specified in section 257AA(2) (before any reduction or substitution) shall be taken to be the result of the following formula--

---

(6) In applying sub-paragraph (4) above a reference in section 257AA or this Schedule to a person's income for the year shall be taken as a reference to his income for the year and not his income for the period. "

Section 38.

SCHEDULE 4 Withdrawal of relief for interest on loans to buy land etc.

Amendments of Part IX of the Taxes Act 1988

1 (1) Section 353 of the Taxes Act 1988 (general provision for relief for interest payments) is amended as follows.

(2) In subsection (1), for "sections 354", in each place, substitute "sections 359".

(3) In subsections (1A) and (1B), omit the words "354 or".

(4) For subsection (1G) substitute--

" (1G) In subsection (1F) above "the applicable percentage" means the percentage which is the basic rate for the year of assessment in question. "

2 Sections 354 to 358 of the Taxes Act 1988 (loans to buy land etc.) shall cease to have effect.

3 (1) Section 367 of the Taxes Act 1988 (supplementary provisions) is amended as follows.

(2) Omit subsection (1) and, in subsection (2), the words "354(1) and".

(3) In subsections (3) and (4), for "sections 354", in each place, substitute "sections 359".

(4) In subsection (5), for "sections 356A to 357 and" substitute "section".

4 In section 369 of the Taxes Act 1988 (mortgage interest payable under deduction of tax), for subsection (1A) substitute--

" (1A) In subsection (1) above "the applicable percentage" means the percentage which is the basic rate for the year of assessment in which the payment has become or becomes due. "

5 (1) Section 370 of the Taxes Act 1988 (meaning of "relevant loan interest") is amended as follows.

(2) In subsection (1)--

(a) for "sections 372" substitute "sections 373"; and

(b) omit the words "or (3)".

(3) In subsection (2), omit the words "354(1) or", "356A, 357 or", and paragraph (c) and the word "and" immediately before it.

(4) Omit subsections (3), (4), (6) and (7).

(5) In subsection (5), for the words from "sections" to "each" substitute "section 365 shall".

6 Section 372 of the Taxes Act 1988 (home improvement loans) shall cease to have effect.

7 (1) Section 373 of the Taxes Act 1988 (loans in excess of the qualifying maximum, and joint borrowers) is amended as follows.

(2) Omit--

(a) in subsection (1), the words "section 356A, section 357(1) or";

(b) subsections (3) and (4);

(d) in subsection (7), the words from "and" to the end.

(3) In subsection (6), for "sections 370 to 372" substitute "section 370".

8 In section 374 of the Taxes Act 1988 (conditions for application of section 369), omit subsection (1)(c) and, in subsection (2), the words "(c) or".

9 (1) In section 375 of the Taxes Act 1988 (interest ceasing to be relevant loan interest, etc.), after subsection (8A) insert--

" (8B) Subsections (1), (5) and (6) above shall not apply where interest ceases to be relevant loan interest by virtue of section 38 of the Finance Act 1999. "

(2) Omit subsections (9) and (10) of that section.

10 Section 375A of the Taxes Act 1988 (option to deduct interest for Schedule A purposes) shall cease to have effect.

11 In section 376 of the Taxes Act 1988 (meaning of qualifying borrowers and qualifying lenders), omit--

(a) in subsection (3), the words from "and" to the end; and

(b) subsection (6).

12 Section 377 of the Taxes Act 1988 (variation of repayment terms of certain loans) shall cease to have effect.

13 In section 378 of the Taxes Act 1988 (supplementary regulations)--

(a) omit subsections (1), (2) and (4); and

(b) in subsection (3), for "377", wherever occurring, substitute "376A".

14 In section 379 of the Taxes Act 1988 (interpretation of sections 369 to 378)--

(a) in the definition of "qualifying lender", omit the words "to (6)";

(b) in the definition of "regulations", omit the words "except in sections 378(1) and (2)"; and

" "separated" means separated under an order of a court of competent jurisdiction or by deed of separation or in such circumstances that the separation is likely to be permanent. "

Other amendments

15 (1) Section 488 of the Taxes Act 1988 (tax liability of co-operative housing associations) is amended as follows.

(2) In subsection (1)--

(a) in paragraph (b), for the words from "as payable not" to "relates; and" substitute "in relation to the association as if there were no interest so payable"; and

(b) omit paragraph (c).

(3) In subsection (2), omit paragraph (b) and the word "and" immediately preceding it.

(4) In subsection (4), omit the words "a member or of".

(5) In subsection (11A), for "all persons concerned" substitute "the association".

(6) Omit subsection (12).

16 In section 548(3) of the Taxes Act 1988 (cases where deemed surrender and payment in relation to certain loans does not apply), for paragraph (a) substitute--

" (a) to a policy if it is a qualifying policy and interest at a commercial rate is payable on the sum lent; " .

17 (1) Section 222 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (relief on disposal of private residence) is amended as follows.

(2) In subsection (8), in paragraph (a), omit the words from "within" to "Act".

(3) After subsection (8) insert--

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