Finance Act 1988 (c. 39)

(The document as of February, 2008)

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(b) for the words "such land" there shall be substituted the words "such woodlands"; and

(6) In section 15(1) of the Taxes Act 1988 (Schedule A), in paragraph 3 of Schedule A (exceptions), after paragraph (a) there shall be inserted--

" (aa) to any profits or gains arising from a person's occupation of any woodlands which are managed on a commercial basis and with a view to the realisation of profits, or " .

(7) In section 53 of the Taxes Act 1988 (farming and the commercial occupation of land), for subsection (4) there shall be substituted--

" (4) Subsection (3) above shall not apply in relation to the occupation of land which comprises woodlands or is being prepared for use for forestry purposes. " ;

but the amendment made by this sub-paragraph shall not apply in relation to land which is being prepared for use for forestry purposes if the requirements of paragraph 4(3) above are satisfied with respect to it.

(8) In sections 380(4), 383(12)(a) and 385(6) of the Taxes Act 1988, for the words "section 54" there shall be substituted the words "paragraph 4 of Schedule 6 to the Finance Act 1988".

(9) Sub-paragraphs (1), (4) and (8) above shall be deemed to have come into force on 15th March 1988; and sub-paragraphs (2), (3) and (5) to (7) above shall be deemed to have come into force on 6th April 1988.

Section 66.

SCHEDULE 7 Exceptions to Rule in Section 66(1)

Cases where rule does not apply

1 (1) Subject to sub-paragraphs (2) and (3) below, section 66(1) of this Act shall not apply in relation to a company which, immediately before the commencement date--

(a) was carrying on business;

(b) was not resident in the United Kingdom, having ceased to be so resident in pursuance of a Treasury consent; and

(2) If at any time on or after the commencement date a company falling within sub-paragraph (1) above--

(a) ceases to carry on business; or

(b) where the Treasury consent there referred to was a general consent, ceases to be taxable in a territory outside the United Kingdom,

section 66(1) of this Act shall apply in relation to the company after that time or after the end of the transitional period, whichever is the later.

(3) If at any time on or after the commencement date a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 66(1) of this Act shall apply in relation to the company after that time.

2 (1) Subject to sub-paragraphs (2) and (3) below, section 66(1) of this Act shall not apply in relation to a company which--

(a) carried on business at any time before the commencement date;

(b) ceases to be resident in the United Kingdom at any time on or after that date in pursuance of a Treasury consent; and

(2) If at any time after it ceases to be resident in the United Kingdom a company falling within sub-paragraph (1) above ceases to carry on business, section 66(1) of this Act shall apply in relation to the company after that time or after the end of the transitional period, whichever is the later.

(3) If at any time after it ceases to be resident in the United Kingdom a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 66(1) of this Act shall apply in relation to the company after that time.

Cases where rule does not apply until end of transitional period

3 (1) Subject to sub-paragraph (2) below, in relation to a company which--

(a) carried on business at any time before the commencement date;

(b) was not resident in the United Kingdom immediately before that date; and

section 66(1) of this Act shall not apply until after the end of the transitional period.

(2) If at any time on or after the commencement date a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 66(1) of this Act shall apply in relation to the company after that time.

4 (1) Subject to sub-paragraph (2) below, in relation to a company which--

(a) carried on business at any time before the commencement date;

(b) ceases to be resident in the United Kingdom at any time on or after that date in pursuance of a Treasury consent; and

section 66(1) of this Act shall not apply until after the end of the transitional period.

(2) If at any time after it ceases to be resident in the United Kingdom a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 66(1) of this Act shall apply in relation to the company after that time.

Supplemental

5 (1) In this Schedule--

"the commencement date" means the date of the coming into force of this Schedule;
"general consent" means a consent under any section to which sub-paragraph (2) below applies given generally within the meaning of subsection (4) of that section;
"taxable" means liable to tax on income by reason of domicile, residence or place of management;
"the transitional period" means the period of five years beginning with the commencement date;
"Treasury consent" means a consent under any section to which sub-paragraph (2) below applies given for the purposes of subsection (1)(a) of that section.

(2) This sub-paragraph applies to the following sections (restrictions on the migration etc. of companies), namely--

section 765 of the Taxes Act 1988;
section 482 of the Taxes Act 1970;
section 468 of the [1952 c. 10.] Income Tax Act 1952; and
section 36 of the [1951 c. 43.] Finance Act 1951.

(3) Any question which arises under any of the provisions of this Schedule shall be determined without regard to the provision made by section 66(1) of this Act.

Section 96.

SCHEDULE 8 Capital Gains: Assets Held on 31st March 1982

Previous no gain/no loss disposals

1 (1) Where--

(a) a person makes a disposal, not being a no gain/no loss disposal, of an asset which he acquired after 31st March 1982, and

(b) the disposal by which he acquired the asset and any previous disposal of the asset after 31st March 1982 was a no gain/no loss disposal,

he shall be treated for the purposes of section 96 of this Act as having held the asset on 31st March 1982.

(2) For the purposes of this paragraph a no gain/no loss disposal is one on which by virtue of any of the enactments specified in sub-paragraph (3) below neither a gain nor a loss accrues to the person making the disposal.

(3) The enactments mentioned in sub-paragraph (2) above are--

(a) sections 44, 56, 123A, 146(3), 147(4), 148 and 149A of the [1979 c. 14.] Capital Gains Tax Act 1979;

(b) sections 267, 273, 340(7), 342, 342A, 342B, 343(5) and 352(7) of the Taxes Act 1970;

(d) section 7 of the [1983 c. 49.] Finance (No.2) Act 1983;

(e) paragraph 2 of Schedule 2 to the [1985 c. 58.] Trustee Savings Banks Act 1985;

(f) section 486(8) of the Taxes Act 1988; and

(g) paragraph 4 of Schedule 12 to this Act.

2 (1) Sub-paragraph (2) below applies where a person makes a disposal of an asset acquired by him on or after 6th April 1988 in circumstances in which either of the relevant enactments applied.

(2) Where this sub-paragraph applies--

(a) an election under subsection (5) of section 96 of this Act by the person making the disposal shall not cover the disposal, but

(b) the making of such an election by the person from whom the asset was acquired shall cause the disposal to fall outside subsection (3) of that section (so that subsection (2) of that section is not excluded by it) whether or not the person making the disposal makes such an election.

(3) Where the person from whom the asset was acquired by the person making the disposal himself acquired it on or after 6th April 1988 in circumstances in which either of the relevant enactments applied, an election made by him shall not have the effect described in sub-paragraph (2)(b) above but an election made by--

(a) the last person by whom the asset was acquired after 5th April 1988 otherwise than in such circumstances, or

(b) if there is no such person, the person who held the asset on 5th April 1988,

shall have that effect.

(4) In this paragraph "the relevant enactments" means--

(a) section 273 of the Taxes Act 1970, and

(b) section 44 of the [1979 c. 14.] Capital Gains Tax Act 1979.

Capital allowances

3 If under section 96 of this Act it is to be assumed that any asset was on 31st March 1982 sold by the person making the disposal and immediately re-acquired by him, sections 34 and 39 of the Capital Gains Tax Act 1979 shall apply in relation to any capital allowance or renewals allowance made in respect of the expenditure actually incurred by him in providing the asset as if it were made in respect of expenditure which, on that assumption, was incurred by him in re-acquiring the asset on 31st March 1982.

Part disposals

4 Where, in relation to a disposal to which section 96(2) of this Act applies, section 35 of the Capital Gains Tax Act 1979 has effect by reason of an earlier disposal made after 31st March 1982 and before 6th April 1988, the sums to be apportioned under section 35 shall for the purposes of the later disposal be ascertained on the assumption stated in section 96(2) of this Act.

Assets derived from other assets

5 Section 96 of this Act shall have effect with the necessary modifications in relation to a disposal of an asset which on 31st March 1982 was not itself held by the person making the disposal, if its value is derived from another asset of which account is to be taken in relation to the disposal under section 36 of the Capital Gains Tax Act 1979.

Group transactions

6 In relation to disposals to which section 96(2) of this Act applies, section 280 of the Taxes Act 1970 (depreciatory transactions effected on or after 6th April 1965) shall have effect with the substitution in subsections (1) and (5) of the words "31st March 1982" for the words "6th April 1965".

Close companies

7 In relation to disposals to which section 96(2) of this Act applies, section 75(1) of the Capital Gains Tax Act 1979 (close company transferring assets at an undervalue after 6th April 1965) shall have effect with the substitution of the words "31st March 1982" for the words "6th April 1965".

Private residence relief

8 In relation to disposals on or after 6th April 1988, section 102(4) of the [1979 c. 14.] Capital Gains Tax Act 1979 (reduced relief where house is not principal residence throughout ownership since 6th April 1965) shall have effect with the substitution of the words "31st March 1982" for the words "6th April 1965".

Replacement of business assets

9 In relation to disposals on or after 6th April 1988, section 115 of the Capital Gains Tax Act 1979 (under which relief is reduced where assets are used for differing purposes during the period of ownership) shall have effect with the insertion after subsection (7) of the following subsection--

" (7A) In this section "period of ownership" does not include any period before 31st March 1982. "

Apportionment of pre-1965 gains and losses

10 In a case where because of paragraph 11 of Schedule 5 to the Capital Gains Tax Act 1979 (which apportions gains and losses partly attributable to ownership before 6th April 1965) only part of a gain or loss is a chargeable gain or allowable loss, subsection (3)(a) and (b) of section 96 of this Act shall have effect as if the amount of the gain or loss that would accrue if subsection (2) did not apply were equal to that part.

Indexation allowance

11 In relation to disposals on or after 6th April 1988, section 68 of the [1985 c. 54.] Finance Act 1985 shall have effect with the substitution for subsection (5) of the following subsection--

" (5) Except where an election under section 96(5) of the Finance Act 1988 has effect, neither subsection (4) above nor section 96(2) of the Finance Act 1988 shall apply for the purpose of computing the indexation allowance in a case where that allowance would be greater if they did not apply. "

Elections under section 96(5): excluded disposals

12 (1) An election under section 96(5) of this Act shall not cover disposals such as are specified in sub-paragraph (2) below.

(2) The disposals mentioned in sub-paragraph (1) above are disposals of, or of an interest in,--

(a) plant or machinery,

(b) an asset which the person making the disposal has at any time held for the purposes of or in connection with--

(i) a trade consisting of the working of a source of mineral deposits, or

(ii) where a trade involves (but does not consist of) such working, the part of the trade which involves such working, or

(c) a licence under the [1934 c. 36.] Petroleum (Production) Act 1934 or the [1964 c. 28 (N.I.).] Petroleum (Production) Act (Northern Ireland) 1964;

but a disposal does not fall within paragraph (a) or (b) above unless a capital allowance in respect of any expenditure attributable to the asset has been made to the person making the disposal or would have been made to him had he made a claim.

(3) Where the person making the disposal acquired the asset on a no gain/no loss disposal, the references in sub-paragraph (2) above to that person are references to the person making the disposal, the person who last acquired the asset otherwise than on a no gain/no loss disposal or any person who subsequently acquired the asset on such a disposal.

(4) In this paragraph--

(a) "source of mineral deposits" shall be construed in accordance with Schedule 13 to the [1986 c. 41.] Finance Act 1986, and

(b) references to a no gain/no loss disposal shall be construed in accordance with paragraph 1 above.

Elections under section 96(5): groups of companies

13 (1) A company may not make an election under section 96(5) of this Act at a time when it is a member but not the principal company of a group unless the company did not become a member of the group until after the relevant time.

(2) Subject to sub-paragraph (3) below, an election under section 96(5) of this Act by a company which is the principal company of a group shall have effect also as an election by any other company which at the relevant time is a member of the group.

(3) Sub-paragraph (2) above shall not apply in relation to a company which, in some period after 5th April 1988 and before the relevant time, is not a member of the group if--

(a) during that period the company makes a disposal to which section 96 of this Act applies, and

(b) the period during which an election under subsection (5) of that section could be made expires without such an election having been made.

(4) Sub-paragraph (2) above shall apply in relation to a company notwithstanding that the company ceases to be a member of the group at any time after the relevant time except where--

(a) the company is an outgoing company in relation to the group, and

(b) the election relating to the group is made after the company ceases to be a member of the group.

(5) In relation to a company which is the principal company of a group the reference in subsection (5) of section 96 of this Act to the first relevant disposal is a reference to the first disposal to which that section applies by a company which is--

(a) a member of the group but not an outgoing company in relation to the group, or

(b) an incoming company in relation to the group.

14 (1) In paragraph 13 above "the relevant time", in relation to a group of companies, is--

(a) the first time when any company which is then a member of the group, and is not an outgoing company in relation to the group, makes a disposal to which section 96 of this Act applies,

(b) the time immediately following the first occasion when a company which is an incoming company in relation to the group becomes a member of the group,

whichever is earliest.

(2) In paragraph 13 above and this paragraph--

"incoming company", in relation to a group of companies, means a company which--
(a)
makes its first disposal to which section 96 of this Act applies at a time when it is not a member of the group, and
(b)
becomes a member of the group before the end of the period during which an election under subsection (5) of that section could be made in relation to it and at a time when no such election has been made, and
"outgoing company", in relation to a group of companies, means a company which ceases to be a member of the group before the end of the period during which an election under section 96(5) of this Act could be made in relation to it and at a time when no such election has been made.

(3) Section 272 of the Taxes Act 1970 shall have effect for the purposes of paragraph 13 above and this paragraph as for those of sections 272 to 281 of that Act.

Section 97.

SCHEDULE 9 Deferred Charges on Gains Before 31st March 1982

Reduction of deduction or gain

1 Where this Schedule applies--

(a) in a case within paragraph 2 below, the amount of the deduction referred to in that paragraph, and

(b) in a case within paragraph 3 below, the amount of the gain referred to in that paragraph,

shall be one half of what it would be apart from this Schedule.

Charges rolled-over or held-over

2 (1) Subject to sub-paragraph (2) below, this Schedule applies on a disposal, not being a no gain/no loss disposal, of an asset on or after 6th April 1988 if--

(a) the person making the disposal acquired the asset after 31st March 1982,

(b) a deduction falls to be made by virtue of any of the enactments specified in sub-paragraph (3) below from the expenditure which is allowable in computing the amount of any gain accruing on the disposal, and

(c) the deduction is attributable (whether directly or indirectly and whether in whole or in part) to a chargeable gain accruing on the disposal before 6th April 1988 of an asset acquired before 31st March 1982 by the person making that disposal.

(2) This Schedule does not apply where, by reason of the previous operation of this Schedule, the amount of the deduction is less than it otherwise would be.

(3) The enactments referred to in sub-paragraph (1) above are--

(a) section 21(4) and (5) of the [1979 c. 14.] Capital Gains Tax Act 1979 (roll-over where replacement asset acquired after receipt of compensation or insurance money);

(b) section 111A of that Act (roll-over where replacement land acquired on compulsory acquisition of other land);

(d) section 123 of that Act (roll-over where shares acquired on disposal of business to company);

(e) section 126 of that Act (hold-over where business asset acquired by gift); and

(f) section 79 of the [1980 c. 48.] Finance Act 1980 (hold-over where asset acquired by gift).

Postponed charges

3 (1) Subject to sub-paragraph (3) below, this Schedule applies where--

(a) by virtue of any of the enactments specified in sub-paragraph (2) below a gain is treated as accruing in consequence of an event occurring on or after 6th April 1988, and

(b) the gain is attributable (whether directly or indirectly and whether in whole or in part) to the disposal before 6th April 1988 of an asset acquired before 31st March 1982 by the person making that disposal.

(2) The enactments referred to in sub-paragraph (1) above are--

(a) section 268A of the Taxes Act 1970 (postponement of charge where securities acquired in exchange for business acquired by non-resident company);

(b) section 278(3) of that Act (charge on company leaving group in respect of asset acquired from another member of same group);

(c) section 84 of the [1979 c. 14.] Capital Gains Tax Act 1979 (postponement of charge where gilts acquired on compulsory acquisition of shares);

(d) section 111B(3) of that Act (postponement of charge where depreciating asset acquired on compulsory acquisition of land);

(e) section 117(2) of that Act (postponement of charge where depreciating asset acquired as replacement for business asset);

(f) section 79 of the [1981 c. 35.] Finance Act 1981 (activation of charge rolled-over under section 79 of the Finance Act 1980 on emigration of donee); and

(g) paragraph 10 of Schedule 13 to the [1984 c. 43.] Finance Act 1984 (postponement of charge on reorganisation etc. involving acquisition of qualifying corporate bonds).

(3) Where a gain is treated as accruing by virtue of section 278(3) of the Taxes Act 1970 this Schedule applies only if the asset was acquired by the chargeable company (within the meaning of section 278) before 6th April 1988.

Previous no gain/no loss disposals

4 Where--

(a) a person makes a disposal of an asset which he acquired on or after 31st March 1982, and

(b) the disposal by which he acquired the asset and any previous disposal of the asset on or after 31st March 1982 was a no gain/no loss disposal,

he shall be treated for the purposes of paragraphs 2(1)(c) and 3(1)(b) above as having acquired the asset before 31st March 1982.

5 (1) Sub-paragraph (2) below applies where--

(a) on or after 6th April 1988 a person makes a disposal of an asset which he acquired on or after 31st March 1982,

(b) the disposal by which he acquired the asset was a no gain/no loss disposal, and

(c) a deduction falling to be made as mentioned in paragraph (b) of sub-paragraph (1) of paragraph 2 above which was attributable as mentioned in paragraph (c) of that sub-paragraph was made--

(i) on that disposal, or

(ii) where one or more earlier no gain/no loss disposals of the asset have been made on or after 31st March 1982 and since the last disposal of the asset which was not a no gain/no loss disposal, on any such earlier disposal.

(2) Where this sub-paragraph applies the deduction shall be treated for the purposes of paragraph 2 above as falling to be made on the disposal mentioned in sub-paragraph (1)(a) above and not on the no gain/no loss disposal.

6 For the purposes of this Schedule "no gain/no loss disposal" has the same meaning as in paragraph 1 of Schedule 8 to this Act.

Assets derived from other assets

7 The references in paragraphs 2(1)(c) and 3(1)(b) above to the disposal of an asset acquired by a person before 31st March 1982 include references to the disposal of an asset which was not acquired by the person before that date if its value is derived from another asset which was so acquired and of which account is to be taken in relation to the disposal under section 36 of the [1979 c. 14.] Capital Gains Tax Act 1979.

Claims

8 (1) No relief shall be given under this Schedule unless a claim is made--

(a) in the case of a gain treated as accruing by virtue of section 278(3) of the Taxes Act 1970 to a company which ceases to be a member of a group, within the period of two years beginning at the end of the accounting period which ends when the company ceases to be a member of the group,

(b) in any other case, within the period of two years beginning at the end of the year of assessment or accounting period in which the disposal in question is made, or the gain in question is treated as accruing,

or within such longer period as the Board may by notice in writing allow.

(2) A claim under sub-paragraph (1) above shall be supported by such particulars as the inspector may require for the purpose of establishing entitlement to relief under this Schedule and the amount of relief due.

Section 109.

SCHEDULE 10 Gains Arising from Certain Settled Property

Charge on settlor with interest in settlement

1 (1) Subject to paragraphs 3 and 4 below, this paragraph applies where--

(a) in a year of assessment chargeable gains accrue to the trustees of a settlement from the disposal of any or all of the settled property,

(b) after making any deductions provided for by section 4(1) of the Capital Gains Tax Act 1979 in respect of disposals of the settled property there remains an amount on which the trustees would, disregarding section 5 (annual exemption) of that Act (and apart from this Schedule), be chargeable to tax for the year in respect of those gains, and

(2) Where this paragraph applies, the trustees shall not be chargeable to tax in respect of the gains concerned but instead chargeable gains of an amount equal to that referred to in sub-paragraph (1)(b) above shall be treated as accruing to the settlor in the year.

2 (1) Subject to sub-paragraphs (2) and (3) below, for the purposes of paragraph 1(1)(c) above a settlor has an interest in a settlement if--

(a) any property which may at any time be comprised in the settlement or any income which may arise under the settlement is, or will or may become, applicable for the benefit of or payable to the settlor or the spouse of the settlor in any circumstances whatsoever, or

(b) the settlor, or the spouse of the settlor, enjoys a benefit deriving directly or indirectly from any property which is comprised in the settlement or any income arising under the settlement.

(2) A settlor does not have an interest in a settlement by virtue of paragraph (a) of sub-paragraph (1) above if and so long as none of the property which may at any time be comprised in the settlement and none of the income which may arise under the settlement can become applicable or payable as mentioned in that paragraph except in the event of--

(a) the bankruptcy of some person who is or may become beneficially entitled to that property or income;

(b) any assignment of or charge on that property or income being made or given by some such person;

(c) in the case of a marriage settlement, the death of both the parties to the marriage and of all or any of the children of the marriage; or

(d) the death under the age of 25 or some lower age of some person who would be beneficially entitled to that property or income on attaining that age.

(3) A settlor does not have an interest in a settlement by virtue of paragraph (a) of sub-paragraph (1) above if and so long as some person is alive and under the age of 25 during whose life none of the property which may at any time be comprised in the settlement and none of the income which may arise under the settlement can become applicable or payable as mentioned in that paragraph except in the event of that person becoming bankrupt or assigning or charging his interest in that property or income.

3 (1) Paragraph 1 above does not apply where the settlor dies during the year.

(2) In a case where the settlor has an interest in the settlement only for either or both of the following reasons, namely--

(a) that property or income is, or will or may become, applicable for the benefit of or payable to the settlor's spouse, and

(b) that the settlor's spouse enjoys a benefit from property or income,

paragraph 1 above does not apply where the spouse dies, or the settlor and the spouse cease to be married, during the year.

4 Paragraph 1 above does not apply unless the settlor is, and the trustees are, either resident in the United Kingdom during any part of the year or ordinarily resident in the United Kingdom during the year.

Right of recovery

5 (1) Where any tax becomes chargeable on and is paid by a person in respect of gains treated as accruing to him (or, if he is a married man, to his wife) under paragraph 1 above he shall be entitled--

(a) to recover the amount of the tax from any trustee of the settlement, and

(b) for that purpose to require an inspector to give him a certificate specifying--

(i) the amount of the gains accruing to the trustees in respect of which he has paid tax; and

(ii) the amount of tax paid;

and any such certificate shall be conclusive evidence of the facts stated in it.

(2) In order to ascertain for the purposes of sub-paragraph (1) above the amount of tax chargeable for any year by virtue of paragraph 1 above in respect of gains treated as accruing to any person, those gains shall be regarded as forming the highest part of the amount on which he is chargeable to capital gains tax for the year.

(3) Where for the year 1988-89 or 1989-90--

(a) section 99(1) of this Act applies in relation to a husband and wife, and

(b) gains are treated by virtue of paragraph 1 above as accruing to either of them, and

(c) tax at a rate equivalent to the higher rate of income tax is charged on the whole or part of the chargeable amount (within the meaning of section 99) of either of them,

sub-paragraphs (4) and (5) below shall have effect for ascertaining for the purposes of sub-paragraph (1) above the amount of tax chargeable for the year in respect of gains treated as accruing by virtue of paragraph 1 above.

(4) Those gains shall be regarded as having been taxed at a rate equivalent to the higher rate of income tax so far as their amount does not exceed the amount (or the aggregate of the amounts) on which tax was charged as mentioned in sub-paragraph (3)(c) above, and otherwise as having been taxed at a rate equivalent to the basic rate of income tax.

(5) In a case where--

(a) section 99(3) applies, and

(b) the chargeable amounts of both husband and wife include gains treated as accruing by virtue of paragraph 1 above,

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