Finance (No. 2) Act 1992 (c. 48)

(The document as of February, 2008)

-- Back --

Page 2

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14

(a) in the course or furtherance of the relevant part of his business by a person who is for the time being certified under this section;

(b) at a time when that person is not a taxable person; and

to be treated, for the purpose of determining the entitlement of the person supplied to credit under sections 14 and 15 above, as tax on a supply to that person.

(4) The amount which, for the purposes of any provision made under subsection (3) above, may be included in the consideration for any supply shall be an amount equal to such percentage as the Treasury may by order specify of the sum which, with the addition of that amount, is equal to the consideration for the supply.

(5) The Commissioners' power by regulations under section 23 above to provide for the repayment to persons to whom that section applies of tax which would be input tax of theirs if they were taxable persons in the United Kingdom includes power to provide for the payment to persons to whom that section applies of sums equal to the amounts which, if they were taxable persons in the United Kingdom, would be input tax of theirs by virtue of regulations under this section; and references in that section, or in any other enactment, to a repayment of tax shall be construed accordingly.

(6) Regulations under this section may provide--

(a) for the form and manner in which an application for certification under this section, or for the cancellation of any such certification, is to be made; and

(b) for the cases and manner in which the Commissioners may cancel a person's certification;

(c) for entitlement to a credit such as is mentioned in subsection (3) above to depend on the issue of an invoice containing such particulars as may be prescribed, or as may be notified by the Commissioners in accordance with provision contained in regulations; and

(d) for the imposition on certified persons of obligations with respect to the keeping, preservation and production of such records as may be prescribed and of obligations to comply with such requirements with respect to any of those matters as may be so notified;

and regulations made by virtue of paragraph (b) above may confer on the Commissioners power, if they think fit, to refuse to cancel a person's certification, and to refuse to give effect to any entitlement of that person to be registered, until the end of such period after the grant of certification as may be prescribed.

(7) In this section references, in relation to any person, to the relevant part of his business are references--

(a) where the whole of his business relates to the carrying on of one or more designated activities, to that business; and

(b) in any other case, to so much of his business as does so relate.

(8) In this section "designated activities" means such activities, being activities carried on by a person who, by virtue of carrying them on, falls to be treated as a farmer for the purposes of Article 25 of the directive of the Council of the European Communities dated 17th May 1977 No. 77/388/EEC (common flat-rate scheme for farmers), as the Treasury may by order designate. "

(2) In section 40(1) of that Act (appeals) after paragraph (h) there shall be inserted the following paragraph--

" (hza) any refusal or cancellation of certification under section 37B above or any refusal to cancel such certification; " .

(3) In section 45(4) of that Act (orders subject to affirmative procedure), after paragraph (d) there shall be inserted the following paragraph--

" (e) an order under section 37B(4) or (8) above. "

(4) In paragraph 7 of Schedule 2 to that Act (charge where person ceases to be taxable person), after sub-paragraph (2) there shall be inserted the following sub-paragraph--

" (2A) This paragraph does not apply where a person ceases to be a taxable person in consequence of having been certified under section 37B of this Act. "

(5) In section 15 of the [1985 c. 54.] Finance Act 1985 (penalties for failures to notify and unauthorised issue of invoices), before subsection (4) there shall be inserted the following subsection--

" (3D) This section shall have effect in relation to any invoice which--

(a) for the purposes of any provision made under subsection (3) of section 37B of the principal Act shows an amount as included in the consideration for any supply; and

(b) either--

(i) fails to comply with the requirements of any regulations under that section; or

(ii) is issued by a person who is not for the time being authorised to do so for the purposes of that section,

as if the person issuing the invoice were an unauthorised person and that amount were shown on the invoice as an amount attributable to tax. "

(6) This section shall come into force on such day as the Commissioners of Customs and Excise may by order made by statutory instrument appoint; and different days may be appointed under this subsection for different provisions and for different purposes.

17 Fuel and power

(1) In Schedule 5 to the [1983 c. 55.] Value Added Tax Act 1983 (zero-rating) in Note (8) to Group 7 (fuel and power) the words from "upon which" to "be charged" shall be omitted.

(2) This section shall apply in relation to matches upon which, by virtue of the repeal of the [1979 c. 6.] Matches and Mechanical Lighters Duties Act 1979 by section 6 above, no duty of excise has been or is to be charged.

Chapter III Car Tax

18 Abolition of fiscal frontiers

(1) The [1983 c. 53.] Car Tax Act 1983 shall be amended in accordance with Schedule 4 to this Act (amendments in connection with the abolition of fiscal frontiers between the member States).

(2) This section and Schedule 4 to this Act shall come into force on such day as the Commissioners of Customs and Excise may by order made by statutory instrument appoint; and different days may be appointed under this subsection for different provisions and for different purposes.

Part III Income Tax, Corporation Tax and Capital Gains Tax

Chapter I General

Lower rate

19 Lower rate: further provisions

(1) In section 7(4) of the [1970 c. 9.] Taxes Management Act 1970 for "basic rate" there shall be substituted "the basic rate or the lower rate".

(2) In each of the provisions to which this subsection applies, after "basic rate" there shall be inserted "or the lower rate"; and this subsection applies to section 91(3)(c) of the Taxes Management Act 1970 and to sections 550(3) and 599A(7) of the Taxes Act 1988.

(3) In each of the provisions to which this subsection applies, after "all income tax" there shall be inserted "not chargeable at the lower rate"; and this subsection applies to sections 167(2A), 233(2), 353(5), 369(3B), 549(2), 683(2), 684(2), 689(2), 699(2) and 819(2) of the Taxes Act 1988 and to the definition of "excess liability" in paragraph 19(1) of Schedule 7 to that Act.

(4) In each of the provisions to which this subsection applies, after "shall be treated" there shall be inserted "as income which is not chargeable at the lower rate and"; and this subsection applies to sections 233(1)(c), 249(4)(c) and 547(5)(c) of the Taxes Act 1988.

(5) In section 369 of the Taxes Act 1988 at the beginning of subsection (3) there shall be inserted "Subject to subsection (5A) below", and after subsection (5) there shall be inserted--

" (5A) In any case where--

(a) payments of relevant loan interest to which this section applies become due in any year, and

(b) the notional lower rate income of the borrower for that year exceeds the actual lower rate income of the borrower for that year,

the borrower shall be charged with tax at the lower rate (rather than the basic rate) for that year on so much of the income on which he is chargeable to tax by virtue of subsection (3) above as is equal to the excess.

(5B) For the purposes of subsection (5A) above--

(a) the notional lower rate income of a borrower for a year is the amount of his total income for the year which would be chargeable at the lower rate if the relevant deduction were not made;

(b) the actual lower rate income of a borrower for a year is the amount of his total income for the year which is actually chargeable at the lower rate;

and the relevant deduction is the deduction which, in computing the borrower's total income otherwise than for the purposes of excess liability, falls to be made on account of the payments referred to in subsection (5A)(a) above. "

(6) In section 421(1)(c) of the Taxes Act 1988 for "shall, notwithstanding that paragraph, be treated" there shall be substituted "shall be treated as income which is not chargeable at the lower rate and, notwithstanding that paragraph, shall be treated".

(7) This section shall apply for the year 1992-93 and subsequent years of assessment.

Married couple's allowance etc.

20 Married couple's allowance etc

Schedule 5 to this Act (which makes provision in relation to the married couple's allowance) shall have effect.

Corporation tax charge and rate

21 Charge and rate of corporation tax for 1992

Corporation tax shall be charged for the financial year 1992 at the rate of 33 per cent.

22 Small companies

For the financial year 1992--

(a) the small companies' rate shall be 25 per cent., and

(b) the fraction mentioned in section 13(2) of the Taxes Act 1988 (marginal relief for small companies) shall be one fiftieth.

Capital gains tax

23 Capital gains tax: rates

(1) In section 4 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (rates of capital gains tax) the following subsections shall be inserted after subsection (1)--

" (1A) If (after allowing for any deductions in accordance with the Income Tax Acts) an individual has no income for a year of assessment or his total income for the year is less than the lower rate limit, then--

(a) if the amount on which he is chargeable to capital gains tax does not exceed the relevant amount, the rate of capital gains tax in respect of gains accruing to him in the year shall be equivalent to the lower rate;

(b) if the amount on which he is chargeable to capital gains tax exceeds the relevant amount, the rate of capital gains tax in respect of such gains accruing to him in the year as correspond to the relevant amount shall be equivalent to the lower rate.

(1B) For the purposes of subsection (1A) above the relevant amount is--

(a) an amount equal to the lower rate limit, where the individual has no income;

(b) an amount equal to the difference between his total income and that limit, in any other case. "

(2) In section 6(1) of that Act--

(a) after "all income tax" there shall be inserted "not chargeable at the lower rate";

(b) after "otherwise than at the basic rate" in both places where the words occur there shall be inserted "or the lower rate";

(3) This section shall apply for the year 1992-93 and subsequent years of assessment.

Groups etc.

24 Amendments relating to group relief etc

Schedule 6 to this Act (which contains amendments relating to group relief etc.) shall have effect.

25 Companies ceasing to be members of groups

(1) Sections 178 and 179 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (deemed sale etc. where company ceases to be member of a group) shall have effect, and be deemed always to have had effect, with the substitution in subsection (1) of each of those sections of the words "in consequence of another member of the group ceasing to exist" for the words from "by being wound up" to the end of the subsection.

(2) Subject to the repeals made by the [1992 c. 12.] Taxation of Chargeable Gains Act 1992, in relation to a company which ceases to be a member of a group of companies on or after 15th November 1991 section 278 of the [1970 c. 10.] Income and Corporation Taxes Act 1970 (deemed sale etc. where company ceases to be member of a group) shall have effect, and be deemed to have had effect, with the substitution in subsection (1) of the words "in consequence of another member of the group ceasing to exist" for the words from "by being wound up" to the end of the subsection.

Charities etc.

26 Donations to charity: minimum limits

(1) In section 339 of the Taxes Act 1988 (charges on income: donations to charity) in subsection (3A) (payment by close company not a qualifying donation if less than £600 after deducting income tax) for "£600" there shall be substituted "£400".

(2) In section 25 of the [1990 c. 29.] Finance Act 1990 (donations to charity by individuals) in subsection (2)(g) (gift must be not less than £600 to be a qualifying donation) for "£600" there shall be substituted "£400".

(3) Subsection (1) above shall apply in relation to payments made on or after 7th May 1992.

(4) Subsection (2) above shall apply in relation to gifts made on or after 7th May 1992.

27 Covenanted payments to charity

(1) In section 671 of the Taxes Act 1988 (revocable settlements allowing release of obligation) in subsection (2) (exceptions to sums payable under such settlements being income of settlor) after "shall not apply" there shall be inserted "in the case of a covenanted payment to charity so long as that power has not been exercised, and in any other case".

(2) This section shall apply in relation to--

(a) any covenant made on or after 7th May 1992;

(b) any covenant made before that day and in the case of which the power to revoke cannot be exercised before that day.

28 Powers of inspection

(1) Subsection (2) below applies if--

(a) an exempt body has made a claim for exemption from tax under section 505(1), 507 or 508 of the Taxes Act 1988, and

(b) the exemption results in, or (where it has yet to be granted or allowed) would if granted or allowed result in, the repayment of income tax or the payment of a tax credit.

(2) The Board may require the body to produce for inspection by an officer of the Board all such books, documents and other records in the possession, or under the control, of the body as contain information relating to the claim.

(3) For the purposes of subsection (1) above each of the following is an exempt body--

(a) any body of persons or trust established for charitable purposes only;

(b) each of the bodies mentioned in section 507 of the Taxes Act 1988 (heritage bodies);

(4) In the Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties for failure to produce documents etc.) at the end of the second column there shall be inserted--

" Section 28(2) of the Finance (No.2) Act 1992. "

(5) Section 94 of the [1990 c. 29.] Finance Act 1990 (donations to charity: inspection powers) shall cease to have effect.

(6) This section shall apply in relation to claims made after the day on which this Act is passed.

Interest, dividends and distributions

29 Returns of interest

(1) In section 17 of the [1970 c. 9.] Taxes Management Act 1970 (returns of interest) in subsection (4) (interest not required to be included in return if declaration that person beneficially entitled to interest not ordinarily resident in UK) the words from "and if a person" to the end of the subsection shall cease to have effect and after that subsection there shall be inserted the following subsections--

" (4A) If a person to whom any interest is paid or credited in respect of any money received or retained in the United Kingdom by notice in writing served on the person paying or crediting the interest--

(a) has declared that the person beneficially entitled to the interest is a company not resident in the United Kingdom, and

(b) has requested that the interest shall not be included in any return under this section,

the person paying or crediting the interest shall not be required to include the interest in any such return.

(4B) Subsection (4C) below shall apply where--

(a) as a result of a declaration made under section 481(5)(k) of the principal Act and the operation of section 482(5) of that Act in relation to that declaration, there is no obligation under section 480A(1) of that Act to deduct a sum representing income tax out of any interest paid or credited in respect of any money received or retained in the United Kingdom, and

(b) the person who makes the declaration referred to in paragraph (a) above, by notice in writing served on the person paying or crediting the interest, requests that the interest shall not be included in any return under this section.

(4C) Where this subsection applies, the person paying or crediting the interest shall not be required to include the interest in any return under this section. "

(2) This section shall apply to interest paid or credited after the day on which this Act is passed.

30 Foreign dividends

In section 123 of the Taxes Act 1988 (foreign dividends) the following subsections shall be inserted after subsection (6)--

" (7) In a case where--

(a) relevant foreign dividends referred to in subsection (2) above are dividends (as opposed to interest or other annual payments),

(b) they are entrusted by a company which at the time they are entrusted (the relevant time) is not resident in the United Kingdom,

(d) at the relevant time the company mentioned in paragraph (c) above directly or indirectly controls not less than 10 per cent. of the voting power in the company mentioned in paragraph (b) above, and

(e) the relevant time falls on or after 1st January 1992,

subsection (2) above shall not apply.

(8) In a case where--

(a) foreign dividends referred to in subsection (3)(a) above are dividends (as opposed to interest or other annual payments),

(b) they are paid by a company which at the time of the payment (the relevant time) is not resident in the United Kingdom,

(e) the relevant time falls on or after 1st January 1992,

subsection (3) above shall not apply. "

31 Equity notes

(1) In section 209 of the Taxes Act 1988 (meaning of "distribution" for purposes of Corporation Tax Acts) in subsection (2)(e) after sub-paragraph (vi) there shall be inserted " or

(vii) equity notes issued by the company ("the issuing company") and held by a company which is associated with the issuing company or is a funded company; " .

(2) In that section the following subsections shall be inserted after subsection (8)--

" (9) For the purposes of subsection (2)(e)(vii) above a security is an equity note if as regards the whole of the principal or as regards any part of it--

(a) the security's terms contain no particular date by which it is to be redeemed,

(b) under the security's terms the date for redemption, or the latest date for redemption, falls after the expiry of the permitted period,

(c) under the security's terms redemption is to occur after the expiry of the permitted period if a particular event occurs and the event is one which (judged at the time of the security's issue) is certain or likely to occur, or

(d) the issuing company can secure that there is no particular date by which the security is to be redeemed or that the date for redemption falls after the expiry of the permitted period;

and the permitted period is the period of 50 years beginning with the date of the security's issue.

(10) For the purposes of subsection (2)(e)(vii) above and subsection (11) below a company is associated with the issuing company if--

(a) the issuing company is a 75 per cent. subsidiary of the other company,

(b) the other company is a 75 per cent. subsidiary of the issuing company, or

(11) For the purposes of subsection (2)(e)(vii) above a company is a funded company if there are arrangements involving the company being put in funds (directly or indirectly) by the issuing company or a company associated with the issuing company. "

(3) In section 212 of the Taxes Act 1988 (exclusions from "distribution") in subsection (1)(b) after "(vi)" there shall be inserted "and (vii)".

(4) This section shall apply where the interest or other distribution is paid after 14th May 1992.

32 Information relating to distributions

(1) The following section shall be inserted after section 234 of the Taxes Act 1988--

" 234A Information relating to distributions: further provisions

(1) This section applies where dividend or interest is distributed by a company which is--

(a) a company 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, or

(b) a company created by letters patent or by or in pursuance of an Act.

(2) If the company makes a payment of dividend or interest to any person, and subsection (3) below does not apply, within a reasonable period the company shall send an appropriate statement to that person.

(3) If the company makes a payment of dividend or interest into a bank or building society account held by any person, within a reasonable period the company shall send an appropriate statement to either--

(a) the bank or building society concerned, or

(b) the person holding the account.

(4) In a case where--

(a) a statement is received by a person under subsection (2) or (3)(b) above,

(b) the whole or part of the sum concerned is paid to or on behalf of the person as nominee for another person, and

within a reasonable period the nominee shall send an appropriate statement to that person.

(5) In a case where--

(a) a statement is received by a person under subsection (2) or (3)(b) above,

(b) the whole or part of the sum concerned is paid to or on behalf of the person as nominee for another person, and

within a reasonable period the nominee shall send an appropriate statement to either the bank or building society concerned or the other person.

(6) In the case of a payment of interest which is not a qualifying distribution or part of a qualifying distribution, references in this section to an appropriate statement are to a written statement showing--

(a) the gross amount which, after deduction of the income tax appropriate to the interest, corresponds to the net amount actually paid,

(b) the rate and the amount of income tax appropriate to such gross amount,

(d) the date of the payment.

(7) In the case of a payment of dividend or interest which is a qualifying distribution or part of a qualifying distribution, references in this section to an appropriate statement are to a written statement showing--

(a) the amount of the dividend or interest paid,

(b) the date of the payment, and

(c) the amount of the tax credit to which a person is entitled in respect of the dividend or interest, or to which a person would be so entitled if he had a right to a tax credit in respect of the dividend or interest.

(8) In this section "send" means send by post.

(9) If a person fails to comply with subsection (2), (3), (4) or (5) above, the person shall incur a penalty of £60 in respect of each offence, except that the aggregate amount of any penalties imposed under this subsection on a person in respect of offences connected with any one distribution of dividends or interest shall not exceed £600.

(10) The Board may by regulations provide that where a person is under a duty to comply with subsection (2), (3), (4) or (5) above, the person shall be taken to comply with the subsection if the person either--

(a) acts in accordance with the subsection concerned, or

(b) acts in accordance with rules contained in the regulations;

and subsection (9) above shall be construed accordingly.

(11) Regulations under subsection (10) above may make different provision for different circumstances. "

(2) In section 234 of that Act--

(a) in subsection (1) for "subsections (3) and (4) below" there shall be substituted "section 234A";

(b) subsections (3) and (4) shall be omitted.

(3) In section 468(3) of that Act for "234(3) and (4)" there shall be substituted "234A".

(4) This section shall apply in relation to distributions begun after the day on which this Act is passed.

Securities and deposits

33 Deep gain securities

Schedule 7 to this Act (which contains provisions about deep gain securities) shall have effect.

34 Rights in pursuance of deposits

Schedule 8 to this Act (which contains provisions about arrangements relating to rights in pursuance of deposits) shall have effect.

35 Exchange of securities

(1) Section 135 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (exchange of securities for those in another company) shall have effect, and be deemed always to have had effect, with the insertion after subsection (1)(b) of " or

(2) Subject to the repeals made by the Taxation of Chargeable Gains Act 1992, in relation to exchanges made on or after 1st January 1992 section 85 of the [1979 c. 14.] Capital Gains Tax Act 1979 (exchange of securities for those in another company) shall have effect, and be deemed to have had effect, with the insertion after subsection (1)(b) of " or

Employee shares

36 Employee share ownership trusts

(1) In section 69 of the [1989 c. 26.] Finance Act 1989 (chargeable events as regards employee share ownership trusts) the following shall be inserted after subsection (3)--

" (3A) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if it is made by way of exchange in circumstances mentioned in section 85(1) of the Capital Gains Tax Act 1979 or section 135(1) of the Taxation of Chargeable Gains Act 1992. "

(2) This section applies in relation to exchanges made on or after 1st January 1992.

37 Employee share schemes: special benefits

(1) Section 80 of the [1988 c. 39.] Finance Act 1988 (unapproved employee share schemes: charge on special benefits) shall be amended as follows.

(2) The following subsections shall be substituted for subsection (2)--

" (1A) If when a benefit is received the company is a dependent subsidiary and its shares are of a single class, the benefit is a special benefit for the purposes of subsection (1) above.

(2) A benefit which does not fall within subsection (1A) above is a special benefit for the purposes of subsection (1) above unless--

(a) when it becomes available it is available to at least ninety per cent. of the persons who then hold shares of the same class as those which, or an interest in which, the person acquired, and

(b) any of the conditions in subsection (3) below is satisfied. "

(3) In subsection (3) (other conditions) in paragraph (a) for "of the class concerned" there shall be substituted "in respect of which the benefit is received".

(4) In paragraph (c) of subsection (3) for "its shares are of a single class" there shall be substituted " the majority of its shares in respect of which the benefit is received are held otherwise than by or for the benefit of--

(i) directors or employees of the company,

(ii) a company which is an associated company of the company but is not its parent company, or

(iii) directors or employees of a company which is an associated company of the company " .

(5) The following subsection shall be inserted after subsection (3)--

" (3A) For the purposes of subsection (3)(c)(ii) above a company is another company's parent company if the second company is a subsidiary of the first. "

(6) This section shall apply in relation to benefits received on or after 12th November 1991.

Business expansion scheme

38 No relief for shares issued after 1993

In section 289 of the Taxes Act 1988 (relief under the business expansion scheme) the words "and before the end of 1993" shall be inserted--

(a) in subsection (1)(a), after "5 April 1983",

(b) in subsection (1)(b), after "18th March 1986", and

39 Extension of relief for private rented housing: property managing companies

Part I of Schedule 4 to the [1988 c. 39.] Finance Act 1988 (extension of business expansion scheme to private rented housing: modifications of the Taxes Act 1988) shall have effect, and be taken always to have had effect, with the substitution of the following paragraph for paragraph 11--

" 11 (1) For subsection (1) of section 308 (application to subsidiaries) there shall be substituted--

" (1) A qualifying company may, in the relevant period, have one or more subsidiaries if the subsidiary or, as the case may be, each subsidiary is a subsidiary to which subsection (1A) or (1B) below applies.

(1A) This subsection applies to a subsidiary if--

(a) it is a dormant subsidiary or exists wholly, or substantially wholly, for the purpose of carrying on activities which do not include, to any substantial extent, activities which are not qualifying activities, and

(b) the conditions mentioned in subsection (2) below are satisfied in respect of it and, except as provided by subsection (3) below, continue to be satisfied in respect of it until the end of the relevant period.

(1B) This subsection applies to a subsidiary if--

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14

-- Back --

Stat